S.N. Variava, J.
1. This is a private complaint filed by the Standard Chartered Bank (hereinafter for brevity's sake referred to as 'the said Bank) through its Director one Mr.Bratindranath Banerjee against the accused Mr. Hiten P. Dalal alleging an offence under section 138 of Negotiable Instruments Act. It is the case of the prosecution that the accused had issued to the said Bank four cheques, viz., (1) cheque No.985203 dated 24th December, 1991 for Rs. 27 crores (Ex. B); (2) cheque No. 985204 dated 26th December, 1991 for Rs. 14.50 crores (Ex. C); (3) cheque No. 989897 dated 17th February, 1992 for Rs. 17 crores (Ex.D); and (4) cheque No. 023423 dated 27th March, 1992 for Rs. 19,95,75,000/- (Ex. E). It is the case of the prosecution that these cheques were given in discharge of the liability of the accused to the said Bank arising from differences in the Contract Rates and Delivery Rates in transactions undertaken at the instance of the accused. It is the case of the prosecution that these cheques when presented were dishonoured for reason 'Not Arranged For'. It is the case of the prosecution that in spite of receipt of a Notice dated 1st June, 1992, the accused has failed to pay the amounts of the said cheques within 15 days thereafter. It is the case of the prosecution that the accused has thus committed an offence punishable under section 138 of the Negotiable Instruments Act.
2. After the charge was framed, the accused pleaded not guilty. He has taken up the defence that the complaint is not maintainable and/or is barred under section 142(a) of the Negotiable Instruments Act. He also contends that this Court has no jurisdiction to entertain and try this complaint. It is also the case of the accused that the charge as framed is not proper inasmuch as it does not set out the liability in discharge of which the cheques are supposed to have been given and the charge does not state that the trial is in respect of the offences in securities committed between 1st April, 1991 and 6th June, 1992. The defence is also of total denial of liability as alleged or at all. It is denied that the accused was concerned with the indicated transactions. It is the case of the accused that the cheques were given for intended deals which never materialised and not in discharge of liability as indicated or any liability. It is also the defence of the accused that he was unable to pay because he became a Notified party before the expiry of 15 days from the receipt of the notice. He thus pleads impossibility of performance. It is also the defence of the accused that the case of the prosecution inherently militates against the presumption of liability as indicated or at all. It is the case of the accused that the presumption, if any, has been rendered sterile from its inception. It is also the case of the defence that no prosecution in respect of a fraud which was committed with the connivance of the complainant can be maintainable. During arguments it was also submitted that certain documents taken on record be demarked and/or be not relied upon by Court.
3. The main points for determination which, therefore, arise for consideration by the Court are:
(1) Whether the Court has jurisdiction to entertain and try this complaint ?
(2) Whether the complaint is not maintainable and/ or barred under section 142(a) of the Negotiable Instruments Act?
(3) Whether the charge as framed is not proper?
(4) Whether the cheques were given in discharge of liability of the accused being the differences in Contract Rates and the Delivery Rates?
(5) Whether the accused was connected with the transactions mentioned in Exs. O, P & Q?
(6) Whether the cheques were given for intended deals which never materialised ?
(7) Whether by reason of the accused becoming a notified person, there was impossibility of performance?
(8) What are the presumptions which the Court must make under section 139 of the Negotiable Instruments Act?
(9) Even in the event of the burden of proof being on the accused, whether the same can be discharged on the basis of preponderance of probabilities?
(10) Whether the case of the prosecution inherently militates against the presumption of liability and whether the presumption has been rendered sterile from its inception?
(11) What are the effects of documents being marked as exhibits without any objection and whether the contents of documents so marked are also proved?
(12) Whether a complaint in respect of a fraudulent action is not maintainable under section 138 of the Negotiable Instruments Act?
4. On the question of jurisdiction the accused had on 14th August, 1992 filed Application No. 15 of 1992 for a prayer that the complaint be dismissed. This on the ground that this Court had no jurisdiction to entertain and try this complaint. On 26th August, 1992, this application was fully argued by Mr. J.J. Bhatt who then appeared for the accused. At that stage the Court indicated that jurisdiction has to assumed on the basis of averments in the complaint. It was pointed out that on the basis of averments in the complaint the Court had jurisdiction. Realising this difficulty, Mr. Bhatt had requested that no orders be passed on the Application, but the question of jurisdiction be taken up for consideration at the stage of final arguments. This request was granted. This is why no separate order is passed on Application 15 of 1992 but the arguments on jurisdiction is dealt with in this judgment. It must be mentioned that sometime during the trial an attempt was made to try and have Application 15 of 1992 reargued. In view of the clear understanding set out above this was not permitted.
5. On the question of jurisdiction Mr. Ovalekar has submitted that this Court sitting as a Special Court has no jurisdiction to entertain and try the complaint. He submitted that the Special Court (Trial of offences relating to transactions in securities) Act, 1992 (hereinafter for brevity's sake referred to as 'the Special Court Act') provides only for trial of offences relating to transactions in securities between 1st April, 1991 and 6th June, 1992. He submits that under section 138 of the Negotiable Instruments Act, the offences can be said to be committed only if there is non-payment, after notice, of a dishonoured cheque given in discharge of a debt or a liability. He submits that the offence, therefore, is of non-payment of money and such an offence has no relation to transaction in security. Mr. Ovalekar refers to the preamble of the Special Court Act which reads as follows:
'An Act to provide for the establishment of a Special Court for the trial of offences relating to transactions in securities and for matters connected therewith or incidental thereto.'
6. He submits that from this it is clear that the trial must be only in respect of offences relating to transactions in securities. He submits that the words 'matters connected therewith or incidental thereto' have a reference only to the words 'trial of offences'. He submits that the words 'matters connected therewith or incidental thereto' have no reference and are not connected with the words 'relating to transaction in securities'. He submits that this is very clear if one reads section 3(2) wherein the Custodian has to be satisfied that a person is involved in an offence relating to transaction in security after 1st April, 1991 and before 6th June, 1992. He points out that in this section, the words 'matters connected therewith or incidental thereto' are not included because these words had no reference to transactions in securities. He submitted that the words 'matters connected therewith or incidental thereto' have been included because provisions for ancillary matters like the procedure to be followed, i.e., appeals, etc. had to be made. He submitted that these words, therefore, only relate to procedure to be followed by this Court. He submits that this is also clear from section 9. He submits that section 9 provides that the procedure for trial in such cases is as prescribed by the Court for trial of warrant cases before a Magistrate. He submits that even under section 8 the Court has jurisdiction only to try a person concerned in an offence referred to in section 3(2). He submits that these provisions clearly limit the jurisdiction of the Court only to trial of offences relating to securities. He submits that trial of offences relating to securities would be trials in the nature of offences of cheating, breach of trust and such like in respect of transactions of securities which essentially would be between the bankers. He submits that an offence of non-payment of cheque even after notice is in the nature of civil liability and would not come within the jurisdiction of this Court. He submits that in such cases, the reason why cheques were given, i.e., the debt or liability for which the cheque is given are not important. He submits that in para 3 of the complaint (Ex. R) initially it was sought to be made out as if the offence was in relation to the transaction in security . He submits that it was on the basis of those averments that the Court took cognizance of the offence. He relies upon the State of Madhya Pradesh v. K.P.Ghiara, reported in A.I.R. 1957 S.C.196 wherein it has been held that the venue or trial of a case is primarily to be determined by the averments contained in the complaint or charge-sheet and unless the facts there are positively disproved, ordinarily the Court, where the charge-sheet or complaint is filed has to proceed with it. He submits that on the basis of averments in para 3 of the complaint, the Court has proceeded with the trial. He points out that during the evidence as set out on pages 19, 24, 37 and 70 of the Notes of Evidence, the case set out in para 3 of the complaint has been given up by PW3. He submits that now in evidence a new case pertaining to alleged liabilities arising from differences in Contract Rates and Delivery Rates is sought to be made out. He submits that the Court assumed jurisdiction on the averments in the complaint. He submits that the complainant has mislead this Court by making wrong averments in para 3 of the complaint. He submits that even if the Court were to consider the new case put forth in the evidence, still no facts which give jurisdiction to the Court have been disclosed.He submits that the case now put forth is that the cheques were given towards alleged liabilities arising as a result of differences between Contract Rates and Delivery Rates. He submits that such a liability, even presuming it existed, was only a civil liability. He submits that such a liability in any case would not constitute an offence in respect of transactions in securities. He submits that such a liability would not constitute any offence at all. He submits that this is clear because in respect of such a liability, the Bank could not have filed any criminal case under any other provisions of Indian Penal Code. He submits that the Bank could only have filed a civil suit for recovery of such a liability. He submits that it necessarily follows that therefore, in respect of such a liability this Court would not have jurisdiction.
7. Mr. Ovalekar also submits that in any event it is for the prosecution to show and bring on record facts which give jurisdiction to this Court. He submits that mere repetition of the language of the section is not sufficient. He submits that facts which constitute a charge should be stated and proved. He submits that it was for the prosecution to prove : (a) that the liability of the nature specified existed; (b) that it was the liability of the accused; and (c) that the cheques were given towards that liability. He submits that in this case the liability is not proved. He submits that in this case it is not proved that these are the liabilities of the accused. He submits that in this case it is not proved that the cheques were given towards those liabilities. He submits that in fact PW3 has admitted in evidence that he does not know why, when and how the cheques were given. He submits that there is no evidence to show that the alleged offence of the accused related to transaction in securities between 1st April, 1991 and 6th June, 1992. He submits that the only witness who could have deposed as to facts, like why, when and how, cheques were given was one Arvind Mohan Lal (the Manager in the Front Office, Treasury Division of the said Bank). He submits that the evidence of this witness has been withheld. He submits that the complaint thus remains simplicitor a complaint for non-payment of dishonoured cheques even after Notice. He submits that this is not linked up to any transaction in securities. He submits that for these reasons, this court has no jurisdiction to entertain and try this complaint and that this case should have gone before a Magistrate.
8. I have considered these submissions of Mr. Ovalekar. Whether or not the cheques have been linked up to liabilities as indicated by the complainant is a question of fact which will be dealt with in detail hereafter. At this stage it is sufficient to state that in my view, it has been so linked up. To Mr. Ovalekar's submission that the Special Court has jurisdiction only in respect of trial of offences relating to securities between 1st April, 1991 and 6th June, 1992, there could be no dispute. The question however is whether the definition of the term 'trial of offences relating to transactions in securities' is to be given a limited meaning as suggested by Mr. Ovalekar. In my view, it is settled law that whenever the Legislature uses words like 'relating to' these are words of wide import. Therefore, offence relating to transactions in securities would mean any offence which has resulted out of or in connection with a transaction in security. As is set out in greater detail hereafter, on evidence it is clear that the only dealings between the accused and the said Bank has been in respect of transaction in securities. As rightly pointed out by Mr. Ovalekar, jurisdiction is normally assumed on the facts as averred. In the complaint it is averred that the cheques were given in respect of meeting liabilities arising out of transactions in securities. The case as made out in the complaint is thereafter particularised. In evidence the case is restricted to liabilities in respect of differences in Contract Rates and Delivery Rates. The liability, therefore, still remains in respect of transactions in securities undertaken between 1st April, 1991 and 6th June, 1992. Under section 138, an offence is not just non-payment of a cheque. The offence is of non-payment of cheque which was given in discharge of a debt or other liability. Therefore, the reason why the cheques were given becomes important. If a cheque was given in discharge of a liability in relation to a transaction in security, then the offence which is committed, even under section 138, is relating to transaction in security. In my view, it is not possible to give the provisions of the Special Court Act the restrictive definition as sought to be given by Mr. Ovalekar. The whole purpose of this Act and the very establishment of this Court was to bring all trials and disputes within one forum. If the restrictive definition is given, then the very object of the Act would be lost. I, therefore, hold that the offence in this case is in relation to transaction in securities and this Court has jurisdiction to entertain and try this complaint.
9. The second point for consideration is whether the complaint is not maintainable and/or barred under section 142(a) of the Negotiable Instruments Act. section 142(a) reads as follows:
'142. Cognizance of offences. - Notwithstanding anything contained in the Code of Criminal Procedure, 1973, -
(a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque;'
10. Mr. Ovalekar submits that under this section the court shall not take cognizance unless there is a complaint in writing by the payee or the holder in due course of the cheque. He submits that the payee of the cheques Exs. B, C, D & E is the said Bank. He submits that the complaint is filed by Mr. Bratindranath Banerjee who claims to be the Director, India task Force of the said Bank. He submits that the said Mr. Banerjee has stated that he has authority to file this complaint. He submits that no such authority has been brought on record. He submits that the said Bank is a separate legal entity by itself, as distinct from Mr. Bratindranath Banerjee. He submits that the complainant, therefore, is an individual and the fact that he is a Director of the said Bank makes no difference. He submits that Mr. Banerjee is not the payee. He submits that the complaint has not been filed by the payee or a holder in due course. He submits that for this reason also the complaint should be dismissed.
11. I am unable to accept these submissions. The said Bank undoubtedly is a legal entity. But it can only act through its officers. Mr. Bratindranath Banerjee is admittedly a Director of the said Bank and an officer of that Bank. On a plain reading of the complaint, it is clear that it has been filed by Mr. Bratindranath Banerjee as a Director of the said Bank and not as an individual. in fact the accused himself understood that this is a complaint by the said Bank. This is clear from application No. 15 of 1992 which has been filed by the accused. In this application, in para 1 the accused himself states that he has received a copy of the complaint filed on behalf of the said Bank. Also there is no challenge to the statement of Mr. Banerjee was that he was authorized to file this complaint. There is also no challenge to the deposition of Mr. Banerjee that the complaint was filed on behalf of the said Bank. The contents and substance of the complaint also make it clear that it is by the said Bank. Accordingly I hold that the complaint is maintainable and is not barred under section 142(a) of the Negotiable Instruments Act.
12. The next point for determination is whether the charge is not proper. Mr. Ovalekar submitted that under section 211 of the Criminal Procedure Code every charge must state the offence and set out all facts which constitute the offence. He submitted that mere repetition of the provisions of section is not sufficient. In this behalf he relied upon the authority of the Supreme Court in the case of Birichh Bhuian v. State of Bihar, reported in : AIR1963SC1120 wherein it is laid down that the charge is not an accusation made or information given in abstract but an accusation made against a person in respect of an act committed or omitted in violation of a penal law forbidding or commanding it. Mr. Ovalekar submitted that, therefore, there must be precise formulation of a specific accusation made against a person of an offence alleged to have been committed by him. He submitted that under section 138 of the Negotiable Instruments Act, no offence can be said to have been committed unless the cheque was issued for discharge in part or in whole of any debt or liability. He submitted that the charge, therefore, should set out the debt or liability for which the cheque is alleged to have been issued. He submitted that in this case the charge merely sets out that the cheques were issued in discharge of a liability without identifying any liability. He submitted that the charge is, therefore, vague and defective. He further submitted that charge does not specify that the cheques were issued in relation to a transaction in security between 1st April, 1991 and 6th June, 1992. He submitted that this would be one of the necessary ingredients of the charge and by reason of the fact that it is not so mentioned the charge is defective.
13. I am unable to accept this submission. As has been rightly submitted by Mr. Ovalekar, the charge has to set out facts which constitute the offence. In my view, this has been clearly done. As is set out in greater detail hereafter, in my view, in a prosecution under section 138 of the Negotiable Instruments Act, the complainant does not need to prove or even indicate that the cheques were given in discharge of any particular debt or liability. as is set out in greater detail hereafter, these are facts which the Court shall statutorily presume. Therefore, if there is no obligation to indicate or prove that the cheques were given in discharge of any debt or liability, then the complaint may not even indicate the debt or liability. In that case the charge also cannot indicate the debt or liability. All that is required is that it should indicate that cheques were given for a debt or liability. The non-existence of a debt or liability will have to be proved by the accused. The charge mentions that the cheques were given in discharge of a debt or liability. I also see no substance in the contention that the charge does not set out that it is in relation to transaction in securities between 1st April, 1991 and 6th June, 1992. This Court can only have jurisdiction provided the offence is in relation to transaction in securities between 1st April, 1991 and 6th June, 1992. The charge sets out that it is in respect of an offence of which this Court has cognizance. This necessarily means that this is in respect of an offence relating to transaction in securities between 1st April, 1991 and 6th June, 1992.
14. Mr. Ovalekar next submitted that even presuming the charge need not and does not set out the debt or liability, if the prosecution has identified a liability, then the charge must be understood in the light of that liability and restricted to the liability. He submits that in this case, in evidence, the debt or liability has been identified as the difference in contract rate and delivery rate in respect of transactions set out in Exs. O, P & Q. He submits that, therefore, the accused was bound to assume that these are the liabilities in respect of which the charge was framed. He submits that the charge must be deemed to be restricted to these liabilities under Exs. O, P & Q. He submits that merely because the charge is widely framed, by not indicating a debt or liability, the Court should not make out a new case for the complainant and include other liabilities. In support of this submission Mr. Ovalekar relies upon the case of Bhagirath v. State of Madhya Pradesh, reported in : 1976CriLJ706 , wherein it is held that the Court should not make out a new case.
15. On the facts of this case I am in agreement with Mr. Ovalekar. But this must not be taken to mean that I am in agreement with the general proposition as canvassed by Mr. Ovalekar. In this case PW3 has deposed that the cheques were given for discharge of liability arising out of differences in contract rate and delivery rate. PW3 has deposed that the cheques were not given in discharge of liability under a general fraud which has also taken place. Since in this case PW3 has himself restricted the case of the prosecution to only these liabilities, all that the accused has to show is that these liabilities did not exist. This not because the liability has been indicated by the prosecution, but because the prosecution has admitted that the cheques were not given for other liabilities. However, where a liability is not specified and there is only a general indication,, this principle may not apply. In cases where a liability is only indicated generally the charge need may not necessarily be limited to that liability. It would all depend on the facts of each case.
16. At this stage it would be proper and convenient to take up for determination the question as to what are the presumptions which can be drawn under section 139 of the Negotiable Instruments Act. To consider this, it might be convenient to set out sections 138 and 139. They read as follows :
'138. Dishonour of cheque for insufficiency, etc., of funds in the account. - where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is retuned by the Bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that Bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to one year, or with fine which may extend to twice the amount of the cheque, or with both:
Provided nothing contained in this section shall apply unless :
(a) the cheque has been presented to the Bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque, within fifteen days of the receipt of information by him from the Bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice.
Explanation. - For the purpose of this section, 'debt or other liability' means a legally enforceable debt or other liability.
139. Presumption in favour of holder. - It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability.'
17. Mr Ovalekar has submitted that section 138 provides a penal liability and the trial is a criminal trial. He submitted that, unlike a civil case, in a criminal trial even if there is a statutory presumption, the prosecution must lead evidence of its entire case at the beginning. He submitted that in criminal cases there is no provision for leading further evidence in rebuttal. He submitted that for this reason also it would also become necessary for the prosecution to identify and prove a debt. Mr. Ovalekar showed to Court a model complaint which is set out on Pg. 783D of the Negotiable Instruments Act by Bhashym and Adiga, 15th Edition. He submitted that this also showed that the debt or liability must be identified and proved. In my view, this submission is not entirely correct. There is no doubt that this is a criminal trial. Undoubtedly the procedure to be followed is that as laid down under the Criminal Procedure Code. It is correct that under the Criminal Procedure Code, once the prosecution closes its case there will be no opportunity to lead evidence of further witnesses. But this does not mean that there is no opportunity to lead evidence in rebuttal. Even in a criminal trial, by way of cross examination of the witnesses for the defence, evidence in rebuttal can be introduced. In any case, the prosecution is always entitled to cross examine the witnesses of the defence for the purposes of countering or demolishing or attempting to counter or demolish the inferences sought to be raised in the evidence lead by the defence. It is one thing to say that it might be advisable for the prosecution to indicate the debt. It is another thing to say that the prosecution must indicate and prove the debt or liability.
18. Mr. Ovalekar next submitted that the fundamental principles of criminal jurisprudence are; (a) that an accused is deemed innocent unless he is proved guilty beyond a reasonable doubt; (b) that the accused is not bound to make any statement and if he makes one, it has to be taken alongwith other evidence; (c) that in case of any doubt, the benefit must always go to the accused. He submitted that this remains the same even in case where there are statutory presumptions.
19. There can be no dispute with these propositions. However one other cardinal principle of jurisprudence civil and criminal must also be kept in mind. That is that if both parties do not produce satisfactory evidence, as required for discharging the burden of proof placed on them, then the party on whom the burden lies will always fail. In such a case the consequences which follow from failure of discharging burden automatically follow.
20. The question which assumes importance in this trial and on the basis of which the evidence and the material will have to be analyzed and looked at is :- 'What are the presumptions which the Court must make under section 139 of the Negotiable Instruments Act?' In other words, what are the facts which the prosecution must prove beyond a reasonable doubt and what are the facts which the Court will statutorily presume to be correct, under section 139 of the Negotiable Instruments Act, unless the contrary is proved.
21. Mr. Ovalekar has submitted that this being an offence punishable with sentence of imprisonment, the interpretation which must be given must be one which would not lay on the accused a very strict and impossible burden. Relying upon the authority reported in (1921) L.R 54 Mr. Ovalekar submitted that the presumption under section 118 of the Negotiable Instruments Act would not apply to a criminal trial. He submitted that on a plain reading of section 139 of the Negotiable Instruments Act the only presumption which the Court can make is that the cheque was received. He submitted that even before this presumption is made, it must first be established that the cheque was of the nature specified in section 138. He submitted that, therefore, the prosecution must first prove, before any presumption can arise, that all the ingredients of section 138 are fulfilled. He submitted that under section 138, it must be shown: (1) that a cheque was drawn on a person; (2) it was on an account maintained by him with a banker; (3) it was for payment of any money to another person from out of that account; (4) it was in discharge in whole or in part of any debt or liability; (5) it was returned unpaid because of the amount of money standing to the credit of that account being insufficient to honour the cheque or because it exceeded the amount arranged to be paid for from that account; (6) that the cheque has been presented within a period of six months from the date on which it was drawn; (7) that the payee or holder in due course had made a demand for payment of the said amount by a notice in writing; (8) that within 15 days of the receipt of information regarding return of cheque the drawer of the cheque failed to make payment of the amount to the payee. he submitted that it is only after the prosecution proves all these ingredients under section 138 that a presumption under section 139 will arise. He submitted that this is clear from the use of the words 'of the nature referred to in section 138' in section 139. He submitted that section 139 uses these words in order to incorporate the ingredients of section 138. He submitted that only after those ingredients are proved that the presumption which will arise that the cheque was received in discharge of the debt or liability.
22. On the other hand Mr. Menon has submitted that the prosecution must only establish: (1) that the accused had given cheques; (2) that they were presented and dishonoured for the reason of insufficient funds; (3) that even after receipt of the written notice, the accused has failed to pay the amount within 15 days. He submitted that there is no obligation to identify the debt or liability much less to prove it. He submitted that the Court shall statutorily presume that the cheque was received in discharge of any debt or liability.
23. These rival submissions have to be considered in the light of the object for which these sections were incorporated. These sections were incorporated by the Banking Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (66 of 1988) for meeting a situation which was prevailing in the society. It was found by the Legislature that a large number of cheques were being given which then were not being honoured. Of course, on a dishonour of a cheque a civil liability accrued. The payee or the holder in due course had a right to recover the amount. However in reality recovery by way of a civil suit takes an inordinately long time. Dealings in cheques was vital and important not only for banking purposes but also for commerce and industry and the economy of the country. this practice of giving cheques without any intention of honouring them was spreading. It was affecting commerce and industry. One of the situations which was also prevailing was that cheques were being given by way of accommodation. In such cases no consideration existed between the drawer and the payee (it being understood that the cheque was being given as and by way of accommodation). This practice then enabled the payee to raise monies on those cheques from innocent third parties who then faced innumerable difficulties, if not impossibility, in recovering monies. It is to curtail these practices that very strict penal provisions have been incorporated into this chapter. The interpretation which must be given would have to be one which would further the purpose of the section and curb the unhealthy practice. The interpretation should not be one which should render nugatory or virtually ineffective the provisions of this chapter. It must also be remembered that these provisions are in respect of cheques. The Negotiable Instruments Act defines a cheque as a bill of exchange drawn on a banker. Under section 5 of the Negotiable Instruments Act, a bill of exchange is an instrument in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order, of a certain person or to the bearer of the instrument. section 8 of the Negotiable Instruments Act defines a 'holder' as follows :
'Holder - The holder of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto.
Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.'
section 9 defines a 'holder in due course' as follows:
'Holder in due course. - Holder in due course means any person who for consideration become the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.'
In a very simple language the holder in due course is a bona fide possessor for value without notice. The Legislature when it enacted these provisions was aware that a cheque was an instrument in writing directing a banker to pay a certain sum of money to a certain person or to his order. The Legislature was aware that the cheques may be bearer instruments. The Legislature was aware that cheques, being negotiable instruments would be negotiated from one person to another. The Legislature was aware that negotiations may be by mere delivery or by endorsement and delivery. It is for that reason that under section 142(a) a right to file a complaint is given not just to a 'payee' but also to a 'holder in due course'. Thus under section 142(a) a 'holder in due course' i.e., an innocent third party who had bona fide received the cheque for consideration also has a right to file a complaint. this innocent third party will in many cases be far removed from the drawer or even the payee. This because the cheque may have been negotiated a number of times. the holder in due course would, therefore, in most cases, not know and have no means of knowing what was the debt or liability for which the cheque was issued or whether in fact there was any consideration. The Legislature was aware of such a situation when it gave the 'holder in due course' a right to file a complaint. The holder in due course would in most cases find it impossible to indicate the original debt or liability. In almost all cases the holder in due course would find it impossible to prove the debt or liability for which the cheque was given by the drawer. It must also be remembered that these provisions have been incorporated in the Negotiable Instruments Act. The Negotiable Instruments Act already contained section 118. Under section 118, there is a presumption that every negotiable instrument was made and drawn for consideration and that every such instrument when it was accepted, endorsed, negotiated or transferred was accepted, endorsed, negotiated or transferred for consideration. This until the contrary is proved. I am unable to accept Mr. Ovalekar's submission that presumptions under section 118 of the Negotiable Instruments Act do not apply to criminal trials. Chapter XVII which has been incorporated in the Negotiable Instruments Act does not provide that presumption under section 118 will not apply to a criminal trial. However if one now looks at the ingredients of section 138, the presumptions under section 118 would not have been sufficient for the purposes of trial under section 138. it is to meet this situation that a separate section i.e., section 139, providing for presumptions has been made in Chapter XVII. Now let us again look at the ingredients necessary under section 138. They are : (1) That the cheque must be drawn by a person. (2) it must be on an account maintained by him with a banker for payment of any amount of money to another person from the account. (3) That the cheque was given in discharge in whole or part any debt or liability. The second element is different from the third. The definition and nature of a cheque itself, i.e., 'an Order on a Banker to pay an amount to some other person or to his order' takes care of the second element. Otherwise the second element would be a matter of the intention of the drawer. This would be a state of mind of the drawer and in most cases impossible of proof by a payee or a holder in due course. As regards the third element, as already stated hereinabove, the holder in due course would in most cases not know and have no means of knowing what the original debt or liability was for which the cheque was issued. He may not even know whether there was any debt or liability. Proving the original debt or liability would be impossible by him. Therefore, if the interpretation of Mr. Ovalekar is to be accepted, then it would have to be presumed that the Legislature gave a right to a holder in due course to file a complaint but at the same time made it impossible for a holder in due course to sustain any such complaint. Such an interpretation would defeat the very object for which this section was incorporated. On the other hand, the following interpretation ensures that all the ingredients are satisfied and the object is achieved. The wording of section 139 is very important. Under section 139 unless the contrary is proved, the court shall make certain presumptions. These statutory presumptions are incorporated in order to make prosecutions effective. Under section 139, the presumptions are first that the holder of the cheque received the cheque. To be noted that the presumption is in favour of a 'holder' and not a 'payee' or 'holder in due course'. The word 'holder' is used for obvious reasons i.e., if the words 'holder in due course' had been used, then it might have been argued that a person must first show that he was the 'holder in due course'. It would then be argued that he must prove that he had paid consideration for the cheque. This would be entirely irrelevant in a prosecution against the drawer by a holder in due course. By use of the word 'holder' the need to prove this consideration has been eliminated. This is in keeping with section 118 of the Negotiable Instruments Act where also it is presumed that Negotiable Instruments was negotiated for consideration. The second presumption is that the holder has received the 'cheque of the nature referred to in section 138'. The Court must therefore, presume that 'a cheque of the nature referred to in section 138' is received. This therefore, eliminates need for the prosecution to prove:
(a) that the cheque was on an account maintained by the drawer with the banker;
(b) that it was for payment of amounts out of that account; and
(c) that it was for discharge in whole or part any debt or liability.
Of course the prosecution would still have to prove that the cheque was drawn by a person, except in cases where it is an admitted position.This because the first element does not refer to the nature of the cheque but to identity of the drawer. This until the contrary is proved. To leave no room for doubt it is made very clear that 'holder in due course' does not need to prove that he had paid consideration. This by providing that the holder of the cheque has received the cheque in discharge, in whole or part, of any debt or any liability. Thus it is very clear that the existence of debt or liability in respect of a cheque both at the time of drawing of the cheque and/or at the time of the receipt of the cheque by the 'holder in due course' is to be presumed by the Court under Section 139. To sum up in a prosecution under section 138, unless the contrary is proved, the Court must statutorily presume;
(a) that the cheque was drawn on an account maintained by the drawer with the banker;
(b) it was for the purposes of paying money to any other person out of that account;
(c) it was in discharge, in whole or in part, of any debt or any other liability; and
(d) that it was received by the holder in discharge of any debt or any liability.
24. Of course this interpretation of sections 138 and 139 imposes on the drawer of the cheque a very strict liability. But it must be remembered that these sections were incorporated for the purposes of discouraging persons from issuing cheques which were then dishonoured. The Legislature was aware of this and has provided a safeguard in section 138. There can be no offence and no prosecution unless a written notice is first given. On receipt of notice an honest drawer has the opportunity to pay up. It is only if the amount is not paid within 15 days of receipt of notice that an offence will be committed. In that case the liability is strict. Also, as stated above, if the interpretation sought to be given by Mr. Ovalekar is accepted, then in most cases no prosecution could be maintained under these sections. Also Mr. Ovalekar's interpretation does not take into consideration the wording of section 139. If the interpretation of Mr. Ovalekar is accepted then it virtually renders nugatory section 139. It also does not take into consideration the nature and character of a Negotiable Instrument.
25. In a Division Bench Judgement of this Court in the case of Rakesh Nemkumar Porwal v. Narayan Dhondu Joglekar, reported in (1993) Cr. L.J 680 the question was whether any offence had been committed under section 138 in cases where the cheque was dishonoured by reason of a stop payment instruction. Under section 138 the cheque must be dishonoured by reason of 'insufficiency of funds or by reason of amount arranged for exceeding limits'. The Division Bench has held that having regard to wide spread practice of issuing cheques which were being dishonoured and many ingenious methods of avoiding payment, the Legislature has opted for a no-nonsense situation. The Division Bench held that therefore, the reason for dishonour is not very material. The Division Bench has held that what is necessary is that there was dishonour. Not only is this judgement biding upon this Court but I am in complete agreement with the view expressed that the Legislature has opted for a no nonsense situation.
26. Mr. Ovalekar submitted that this interpretation would work great hardship on innocent persons. He submitted that a person may give a cheque to a friend by way of a friendly loan or a person may give to another person a cheque by way of a gift or charity. He submits that if for unforeseen reason the cheque is dishonoured then on this interpretation these innocent parties would have to undergo the trauma of a trial before they can prove their innocence. In my view, the situation is not as bad as Mr. Ovalekar seeks to make it out to be. If a cheque is given by way of loan to a friend or a gift or for charity the intention was to pay the amount. Even if the cheque is dishonoured, then prosecution can only be launched after a written Notice is first given. Thus the drawer can then pay the amount. So no hardship would be caused at all. It is only in cases where the intention was not to honour the cheque, that any hardship would be caused. Mr. Ovalekar then gave another example. He stated that a cheque may be given to a friend as a friendly loan. Thereafter the relations between the two may become strained and therefore, the drawer may no longer want to give the loan. He submitted that when the drawer seeks to stop payment of the cheque, the payee may prosecute him. He submitted that in that case, the innocent drawer will have to go through a trial. In my view, the example is far fetched and in any case a rare case. How many such cases would arise in practice. They would be negligible. Also even in this extreme case the cheque would have been given by way of an accommodation. In effect no prosecution will lie. If a false and frivolous complaint is filed, then the complainant himself would become liable to a subsequent prosecution and in damages. That in my view, would be a sufficient deterrent to any person from trying to misuse these provisions. Further the interpretation is to be given with a view to meet the object for which the sections were enacted and not to meet all and/or extremely rare cases.
27. Thus in my view, it will have to be held that in cases of prosecution under section 138 of the Negotiable Instruments Act, the Court shall presume that the cheque was drawn, that it was on an account maintained by a person with a banker, that the cheque was for payment of the amount out of that account and that the cheque was given in discharge in whole or in part of any liability. This till the contrary is proved. In my view, in such cases it is not at all necessary for the complainant to either identify the debt or liability much less prove it. The Court will also presume, in cases of complaints by 'holders in due course' that the 'holder in due course' has received the cheque in discharge of any debt or liability.
28. At this stage, one other ancillary point may be considered. It is to be seen that under section 118 the words which are used are that the cheque was for consideration whereas under sections 138 and 139 the words used are for discharge in whole or in part of any debt or other liability. The words under sections 138 and 139 are much wider than the words used under section 118. The Legislature has knowingly and wisely not used the word 'for consideration' either in section 138 or in section 139. The reason for that is that under section 118 of the Negotiable Instruments Act, there have been divergent judicial opinions of different courts. This on the question as to whether the presumption of consideration under section 118 is only for the consideration shown on the instrument or any other consideration. The Bombay High Court has held, in the case of Tarmahomed Haji Abdul Rehman v.Tyeb Ebrahim Bharamchari, reported in A.I.R. 1949 Bom. 257, that under section 118, the presumption is in favour of there being consideration in law and not consideration mentioned in the negotiable instrument. It was held that the burden to prove the contrary is on defendant even though consideration mentioned in instrument turns out to be wrong and even though the plaintiff may attempt but fail to prove consideration. But a number of other High Courts have taken a contrary view, i.e., the consideration which is to be presumed is only the consideration shown on the instrument. It is to avoid this controversy and put the matter beyond any doubt that the Legislature has used words of very wide connotation in sections 138 and 139 . The words 'any debt or other liability' make it very clear that it is not in respect of a particular debt or liability. The presumption which the court will have to make in all such cases is that there was some debt or liability . In my view, the ratio of Tarmahomed Haji Abdul Rehman's case (supra) will apply with greater force in prosecutions under section 138. It will be for the accused to prove the contrary , i.e., that there is no debt or any liability. This of course unless the prosecution restricts itself to a particular liability.
29. This being the law, in this case the burden of proving that the cheques were not issued in discharge of the liability indicated by the prosecution is squarely on the accused. The court must statutorily make a presumption that the cheques were issued for the liability indicated by the prosecution unless contrary is to be proved.
30. One further aspect to be discussed is the quantum of proof and the manner of proof by which an accused can discharge the statutory burden placed on him. This has been the subject matter of a number of decisions of various courts which have been cited before me. In the case of Kundan Lal Rallaram v. Custodian of Evacuee Property, reported in A.I.R. (1961) S.C. 1316, it was held that section 118 of the negotiable instruments act lays down the special rule of evidence applicable to negotiable instruments. It was held that this is a presumption of law and thereunder the Court must presume that the negotiable instrument or the endorsement was made for consideration. It was held that this in effect throws the burden of proof of failure of consideration on the maker of the note or the endorser, as the case may be. The Supreme court held that the burden of proof as a matter of law and pleading and the other burden of establishing a case were different. It held that the former was a fixed as a question of law based on the pleadings and was unchanged during the entire trial whereas the latter is not constant but shifts as soon as party adduces sufficient evidence to raise a presumption in his favour. The Supreme Court held that the evidence required to shift the burden need not necessarily be direct evidence, i.e., oral or documentary evidence or admissions made by opposite party; it may comprise circumstantial evidence or presumptions of law or fact. The Supreme Court held that if relevant evidence is withheld, the court can then draw a presumption that if produced it would be unfavourable. The supreme court held that this presumption could under certain circumstances rebut the presumption of law.
31. In the case of Dhanvantrai Balwantrai Desai v. State of Maharashtra, reported in : 1964CriLJ437 , a Bench of four Judges of the Supreme court considered the question of manner and quantum of proof required to discharge a burden on an accused. This was a case under Prevention of Corruption Act where the statutory presumption under section 4(1) thereof arose. section 4(1) of the Prevention of Corruption Act reads as follows:
'4. Presumption where public servant accepts gratification other than legal remuneration:-
(1) Where in any trial of an offence punishable under section 161 or 165 of the Indian Penal Code (45 of 1860), or of an offence referred to in Cl. (a) or Cl. (b) of sub-section (1) of section 5 of this Act punishable under sub-section (2) thereof, it is proved that an accused person has accepted or obtained, or has agreed to accept or attempted to obtain, for himself or for any (other person, any gratification other than legal remuneration) or any valuable thing from any person, it shall be presumed, unless the contrary is proved, that he accepted or obtained, or agreed to accept or attempted to obtain that gratification or that valuable thing, as the case may be, as a motive or reward such as is mentioned in the said section 161, or as the case may be, without consideration or for a consideration which he knows to be inadequate.'
32. In this case it was contended that the accused was entitled to rebut the presumption by offering an explanation which was reasonable and probable. In this case it was urged that apart from the bare statement of the complainant there was nothing else to show that the accused had asked for any bribe. In this case also the elementary principles of criminal jurisprudence were relied upon. It was contended in light thereof that the finding of the High Court that there was no evidence placed before them to create a reasonable doubt, amounted to the accused being required to discharge more or less the same burden for proving his innocence which the prosecution has normally to discharge for proving his guilt. The Supreme Court held that there is a difference between a presumption under section 114 of the Evidence Act which was open to a Court to draw or not to draw and a presumption as to the existence of a fact. The Supreme Court held that under section 114 it was not at all obligatory on a court to draw any presumption. The Supreme Court held however under section 4(1) if a certain fact was proved, i.e., that a gratification or a valuable thing had been received by the accused, the court was required to draw a presumption that it was received as a motive for reward. The Supreme Court held that it was open to the accused to show that though the money was not due to him as a legal remuneration, it was legally due to him in some other manner or that it was received under a transaction or arrangement which was lawful. The Supreme Court held that the burden on the accused person in such a case would not be as light as it is in the cases under section 114 of the Evidence Act. The Supreme Court held that this burden cannot be discharged by the accused by offering an explanation which is reasonable and probable. The Supreme Court held that the explanation must be shown to be true. The Supreme Court held that the words 'unless the contrary is proved' make it clear that the presumption has to be rebutted by proof and not by a bare explanation which is merely plausible. The Supreme Court held that unless the explanation was supported by proof, the statutory presumption cannot be said to be rebutted. In coming to this conclusion, the Supreme Court relied upon its earlier decision in the case of State of Madras v. Vaidyanath Iyer, reported in : 1958CriLJ232 . In that case also it was held that something more than raising a reasonable probability is required for rebutting a presumption of law. In that case it was held that the bare word of the appellant (accused) is not enough and it was necessary for him to show that upon the established practice his explanation was so probable that a prudent man ought, in the circumstances, to have accepted it.
33. In the case of State of Ajmer (now Rajasthan) v. Shivaji Lal, reported in : 1959CriLJ1127 the accused, a teacher in a Govt. school, took some money from the complainant stating that he would get him a job in the local loco shed. The accused was prosecuted for an offence under section 161 of the Indian Penal Code. The Supreme Court held that under section 161 the person accepting the gratification should be 1) a public servant, 2) accept gratification for himself, and 3) the gratification should be a motive or reward for rendering or attempting to render any service to any person or disservice to any person with any other public servant. The Supreme Court held that the mere fact that a person takes money to get a job for another person somewhere would not by itself necessarily be an offence under section 161 unless all the ingredients of that section are made out. The Supreme Court held that as the charge under section 161 merely stated that the accused being a public servant accepted a sum of money from a certain person 'as illegal gratification as a motive for securing a job for him in the Railway Running Shed', the third ingredient of offence under section 161 was not even charged as it did not disclose who was the public servant whom the accused would have approached for rendering or attempting to render service to the complainant. The Supreme Court held that when there was no indication whatever that any public servant was to be approached or influenced by the accused there could be no question of making a presumption, under section 4(1) of Prevention of Corruption Act, that the payment was as a motive or reward for rendering service with any public servant. The ratio in this case proceeds on the footing that an ingredient of the offence is not made out. This, therefore, can have no application to, cases like the present, where all the ingredients are made out and set out in the charge. In any event, the later judgment of the Supreme Court in Dhanwantrai Desai v. State of Maharashtra is a judgment of a larger bench. It takes a different view on how statutory presumptions are to be construed. This later judgment of four judges of the Supreme Court would be binding on this Court and prevail over this judgment.
34. in the case of V.D. Jhingan v. State of Uttar Pradesh, reported in : [1966]3SCR736 it was held that for the purposes of raising a presumption under section 4(1), the prosecution had to prove that the accused had received gratification other than legal remuneration. It was held that once it was shown that the accused had received a certain sum of money which was not a legal remuneration, the condition prescribed by the section was satisfied and the presumption must be raised. It was held that mere receipt of money was sufficient to raise the presumptions. On this basis, the Supreme Court held that in the case before it, the requirement of section 4(1) had been fulfilled and the presumption must be raised. The Supreme Court then held that even in cases where a burden of proof lay upon an accused, he was not required to discharge that burden by leading evidence to prove his case beyond a reasonable doubt. The Supreme Court held that the test prescribed in deciding whether the prosecution has discharged its onus to prove the guilt was one of 'beyond a reasonable doubt'. The Supreme Court held that the same test cannot be applied to an accused who is required to discharge the burden placed upon him under section 4(1). The Supreme Court held that it was not necessary for the accused to prove his case beyond a reasonable doubt or in default to incur a verdict of guilt. The Supreme Court held that the onus of proof lying upon the accused is to prove his case by preponderance of probability. The Supreme Court held that the onus on an accused may well be compared to the onus on a party in a civil proceeding and just as in civil proceedings, the Court trying an issue makes its decision by adopting the test of probabilities, so must a Criminal Court hold that the plea made by the accused is proved if a preponderance of probability is established by the evidence led by him.
35. in the case of Sailendranath Bose v. State of Bihar, reported in A.I.R. 1968 S.C. 1292 the Supreme Court was again considering this question under section 4 of the Prevention of Corruption Act. After considering Dhanwantrai's case (supra), the Supreme Court held that the fact is said to be proved when after considering the matters before it the Court either believes it to exist or considers its existence was so probable that a prudent man ought under the circumstances of the particular case to act upon the supposition that it exists. The Supreme Court held that the proof to be given by the accused must satisfy the aforementioned conditions. The Supreme Court held that even though the statutory presumption had to be rebutted by proof and not by a bare explanation which was plausible, the burden resting on the accused would be satisfied if the accused establishes his case by a preponderance of probability. The Supreme Court held that it was not necessary for the accused to establish his case by the test of proof beyond reasonable doubt. The Supreme Court held that the burden placed upon the accused was not the same as that placed on the prosecution.
36. in the case of Ram Krishna Bedu Rane v. State of Maharashtra, reported in(1973)1 S.C.C. 1366 the ratio laid down in Dhanwantrai's case (supra) has been relied upon and it has been held that there was distinction between the presumption under section 114 of the Evidence Act and a statutory presumption. It was held that under a statutory presumption the mere explanation or evidence which need be only reasonable true and not necessarily true is not enough. It was held that the burden resting on the accused person in such a case would not be as light as it is where a presumption is raised under section 114 of the Evidence Act. The Court held that the statutory presumption must be rebutted by proof and not by a bare explanation which is plausible.
37. in the case of Trilok chand Jain v. State of Delhi, reported in : AIR1977SC666 this question was again considered in the light of section 4 of Prevention of Corruption Act. Mr. Ovalekar very strenuously relied upon this case for the proposition laid down therein. Before the proposition is considered, in my view, it would be relevant to set out the facts of that case. This because in my view, the proposition laid down in this case would apply only where facts are as clear as in this case. In this case, the complainant had applied for an electric connection to his factory. An Inspector in the company, approached him and asked for a bribe. The bribe money was settled. The complainant informed the Police who then laid a trap. The Inspector however did not come to collect the money. He sent the appellant, who was a mere labourer in the company and in no position to show any favour to anybody, to collect the money. The complainant handed over the money to the appellant. The police caught the appellant, recovered the marked money and prosecution was launched against the Inspector as well as this labourer. In the trial the Inspector was acquitted but the labourer was convicted. The Supreme Court was hearing the appeal against the conviction of the labourer. The Supreme Court noted that the Inspector had been acquitted. The Supreme Court observed that the labourer had been convicted by reason of presumption under section (1). The Supreme Court held that the facts disclosed by the prosecution could not raise any presumption that this labourer, who had no power to do a favour, could receive any gratification as a motive or a reward. It is under these extreme circumstances and only on the facts of this case that the Supreme Court held that if the story set up by the prosecution inherently militates against or is inconsistent with the facts presumed, the presumption will be rendered sterile from its very inception, if out of judicial courtesy it cannot be rejected out of hand as still born. The Supreme Court also reiterated the well established principle that the quantum and nature of proof required to displace a presumption may vary. The Supreme Court held that while a mere plausibility of an explanation may not be sufficient, the presumption would stand discharged if the material brought on record, in its totality, renders the existence of the facts improbable.
38. Undoubtedly in cases where the facts are such, that they militate against the existence of a presumption, then the presumption would be rendered sterile at its inception. However this principle cannot be brought into play where there are two plausible possibilities. If two plausible possibilities are available, then the accused must discharge the burden of proof placed on him. The standard being that laid down in Dhanwantrai's case (supra).
39. Mr. Ovalekar had also relied upon the case of Rabindra Kumar Dey v. State of Orissa, reported in : 1977CriLJ173 wherein the Supreme Court enunciated the cardinal principles of criminal jurisprudence and reiterated that the accused was entitled to the benefit of doubt. In this case there was no statutory presumption. This was a case where the burden of proving beyond a reasonable doubt lay entirely on the prosecution.
40. Mr. Ovalekar also relied upon the case of State, Delhi Administration v. Satish Chand Sharma, reported in 1987 Cr.L.J. Pg. 1205. The Delhi High Court considering a case under the Prevention of Corruption Act held that before any reliance can be placed on the presumption under section 4(1), it was the duty of the prosecution to first prove the basic facts on which their case rested. It was held that unless that was done, the legal presumption could not be invoked and that the burden of proving the case squarely rested on the prosecution. It was held that such a burden could not be dilated because the charge was under section 4(1). With great respect to the Learned Judges concerned, I am unable to agree with the view expressed herein. This view is contrary to a plain reading of the section itself. This view is contrary to the Supreme Court Judgments cited above. It may only be mentioned that the judgments referred to above were not cited before the Delhi High Court. In my view, in view of the judgments of the Supreme Court, this cannot be considered to be good law.
41. From the above mentioned authorities, the position of law which emerges is that even in cases where the burden is on the accused the proof that is required to be given by him cannot be equated with the degree and character of proof which normally rests on the prosecution. Whilst the prosecution must prove its case beyond a reasonable doubt, the accused may discharge his burden and prove his case on the basis of preponderance of probabilities. Also if facts so justify, and if the story put forward by the prosecution inherently militates against the facts presumed, then the presumption will at its inception be rendered sterile. To be remembered that in cases of statutory presumptions the Court is compulsorily bound to draw the presumption raised by the statute. Therefore, for the presumption to be rendered sterile the facts must clearly make out that the ingredients of the offence are absent. A Court cannot render a statutory presumption sterile by a process of convoluted logic or by giving benefit of doubt. Even in cases of Statutory Presumptions, how the accused discharges the burden and the quantum and nature of proof required, will undoubtedly vary according to circumstances of each case. Depending on facts and circumstances of each case, the proof may partake of circumstances appearing in the prosecution case or evidence or those brought out in cross examination of prosecution witnesses. It may also partake of defence evidence, oral or documentary. However, as emphasised by the Supreme Court in Dhanwantrai's case (supra) and subsequently accepted and followed in Ram Krishna B. Rane's case (supra), the presumption has to be rebutted by proof. The bare word of the accused is not enough. It is necessary for him to show that his explanation is so probable that a prudent man ought in the circumstances of the case accept it. It necessarily follows that if the case suggested by the accused leaves questions unanswered and unexplained even on probabilities and in certain respects is entirely unbelievable and/or bordering on absurdity, then it cannot be said that even on a preponderance of probabilities, the accused has discharged his burden. In such cases there can be no question of the presumption being rendered sterile.
42. These above mentioned law and principles will have to be kept in mind while considering the respective cases. It must be kept in mind that as this is a case under section 138, all that the prosecution needs to prove is that the cheques were given, that they were presented and dishonoured, that a written notice was given and received by the accused and that the accused still failed to pay within 15 days thereafter. The prosecution need not prove or identify the debt or liability for which the cheques were given. The Court must presume that the cheques were of the nature specified under section 138, i.e., the cheques were drawn upon the account maintained by the accused for payment of amounts out of that account and that it is for the discharge of the debt and liability indicated by the prosecution. The accused can discharge the burden on the basis of preponderance of probabilities, nonetheless it must be proof. The mere word of the accused is not sufficient. To emphasize again one of the established principles of jurisprudence, criminal or civil, that if a party on whom a burden lies does not discharge it even on preponderance of probabilities, then that party must fail and the natural consequences flowing therefrom must follow.
43. At this stage, it might be convenient to set out some undisputed facts. They are :
(1) That the cheques Exs. B, C, D & E were drawn and issued by the accused and that they bear his signatures.
(2) That the cheques Exs. B, C, D & E were presented and dishonoured.
(3) That notice dated 1st June, 1992 (Ex. F) was received and in spite of this notice the amounts of the cheques were not paid within 15 days thereafter.
(4) That during the period 1st April, 1991 and 6th June, 1992 the accused had acted as a broker for the said Bank. It must be mentioned however that it is denied that the accused had acted as a broker in respect of the transactions under Exs. O, P & Q.
(5) That there are restructuring of records of the Bank during this period. It however is not admitted that such restructuring has been at the instance or behest of the accused.
(6) On evidence available before this Court the only mode of restructuring of records is either camouflaging the nature of transactions or by way of differences in Contract Rates and Delivery Rates.
(7) Correspondence Exs. F, G, H, J, K & L is admitted.
(8) That the cheques were found in the drawer of one Arvind Mohan Lal who admittedly was the Manager in the Front Office of the Treasury Division of the said Bank at the relevant time.
44. In the light of the law and the above mentioned undisputed facts, the question as to whether the cheques were given in discharge of the indicated liability must now be determined. In the complaint in paras 3 and 4, it is stated as follows:
'3. In or about March 1989, the accused started trading as a broker in respect of the security transactions between the Bank and other Banks and financial institutions. During the month of May 1992, it was discovered that in respect of payments made by the Bank for the purchase of securities, there was a substantial short-fall of securities and/or Bank Receipts which had not been handed over to the Bank. In the course of enquiry, the accused admitted to one Ravi Iyer of the Bank that in respect of payments received from the Bank for the purchase of securities, there was a very substantial short-fall of securities and/or Bank Receipts, and promised to make up for the short-falls identified. A scrutiny of the Bank records and enquiries made, ultimately revealed a huge fraud in respect of the security transactions, and ultimately the Bank lodged a First Information Report with the C.B.I. who vide its RC-11 (S/92-SCB-Bom) registered a case for various offences and arrested many persons including the accused and produced them before this Hon'ble Court, and the matter is pending investigation with the C.B.I.
'4. In the course of enquiries made by the Bank, we came across four cheques in a desk drawer of one Arvind Mohan Lal who was working with the Bank at the material time and who was also arrested among others by the C.B.I. in the said case referred to above. The four cheques were dated 24th December 1991, 26th December, 1991, 17th February, 1992, and 27th March, 1992 and valued at Rs. 27,00,00,000/-, Rs.14,50,00,000/, Rs.17,00,00,000/- and Rs.19,95,75,000/- respectively. All these cheques were drawn by the accused on Andhra Bank in favour of the Bank. When the said Arvind Mohan Lal was confronted, he admitted that the said cheques were handed over to him by the accused. It may be stated that in the course of the enquiries when the accused was questioned, he had admitted, among other things, to having taken out sums from the Bank by Account Payee Cheques favouring other banks in the guise of security transactions, which were then diverted and misused.'
45. Before the charge was framed the prosecution led the evidence of Mr. Derek Reed, Mr. S. Gynanavinayagam and Mr. Bratindra Nath Banerjee. Mr. Reed and Mr. Banerjee were cross examined on behalf of accused, with a right to further cross examine being reserved. After hearing submissions on behalf of prosecution and the accused, the charge was framed on 26th August, 1992. The charge was then read out and explained to the accused. The accused stated that he wanted to enter upon his defence and be tried. The accused stated that he wanted to cross examine all witnesses of prosecution and asked for time to prepare for cross examination. For this purpose the case was adjourned. The accused thereafter cross examined all the prosecution witnesses. The prosecution then examined two production witnesses, viz., Mr. Arjun Goswami and Mr. Bipin Bijoy Sunadhar.
46. The statement of the accused under section 313 of the Criminal Procedure Code was recorded on 5th and 6th January, 1993. accused filed his written statement. In the written statement the accused has denied that the cheques Exs. B, C & E were issued or drawn in discharge in full or in part any debt or liability. He pleads that he does not have any debt or liability towards the said Bank. He states that he was a broker in shares and securities since May, 1988 and prior thereto he was working in the securities Division of M/s. V.B. Desai & co., who inter alia were also brokers for the said Bank. He states that whilst working with the said firm of M/s. V.B. Desai & Co., he used to regularly come in contact with officers of various Banks and Institutions including the Standard Chartered Bank. He states that in May 1988, he started his own independent business as a broker in shares and securities and other Money Market Instruments. He states that on commencement of his independent business, he was appointed as a broker by various Banks and Institutions including this Bank in respect of their transactions in Government securities and Money Market Instruments. He states that because of his ability to fulfill the requirements of the Banks to their satisfaction, the business done through him by various Banks including this Bank was increasing every year. He states that since 1988, he came in contact and dealt with different officers of the said Bank who were looking after the Government security and Money Market Business of the Bank. He states that in the security and Money Market Business by and large business dealings used to take place on telephone and thereafter Banks directly deliver the cheques/pay order, contracts, cost memos, security, etc., as the case may, to the counter party. He states that about a year and half or two years ago, the Senior Officer of the Treasury Division of the said Bank Mr. Arvind Mohanlal talked to him and informed him that they were working on some new scheme and methods of augmenting the Bank's profits and profitability on their Government 'securities holdings. He states that Mr. Arvind Mohanlal told him that they wanted his (accused's) help and assistance for the same. He states that they (Bank) agreed to give him, more business in the process and he agreed to give them certain facilities and adjustment as and when required by them. He states that he is not aware of the precise nature of the scheme that was being worked out by the said Bank which required such facility. He states that he was told that for these services he would be suitably compensated for his services. He states that in respect of such transactions, it was agreed that accounts would be kept off the record and confidential and maintained by the officers of the said Bank. He states that pursuant to this arrangement the accused would be telephonically informed by the said Bank to send to them a cheque or a pay order of the amount indicated on phone. He states that he was not aware as to what adjustments were being made by the officers in their records. He states that over a period of time he found that he was being asked to send cheques or pay orders for certain specific amount and on occasions they would be in round figures. He states that from the later half of 1991, i.e., some time after October or November 1991, the demands for such payments were much more frequent and of much larger amounts. He states that since the volume of business in the later half of 1991 had more than doubled, the need of the said Bank for larger amounts at frequent intervals did not become cause for enquiry or concern. He states that he had assumed that whatever be the scheme of the said Bank, it would be in accordance with law and the guidelines of the Reserve Bank of India. He states that the entire business was being carried out on the basis of mutual trust and faith and that the nature of Government Security Business was such that deal running into hundreds of crores of rupees were being struck on telephone through brokers and on occasions directly between dealers of different Banks. He states that he has now broadly learnt the nature of the adjustment and restructuring that was being carried on by the said Bank. He states that it is only now, in the course of trial, that for the first time he had an occasion to see the Deal Slips of the said Bank. He states that there are a large number of alterations and cancellations in these Deal Slips. He alleges that these slips are not maintained in the ordinary and routine course of business and that the said Bank was adjusting their books of accounts for purposes best known to them. He states that this may possibly be with a view to avoid showing any losses in transactions of Government securities. He makes it clear that this is only his inference based on what he has now seen and the general information received by him in the last few months and on the basis of Jankiram Committee Report and other reports. He states that none of the Deal Slips or record of the Bank were prepared in his presence or with his knowledge or consent. He states that on numerous occasions he was buying Government securities, Units, PSU Bonds from various Banks including the said Bank through Andhra Bank and he was selling such securities to various Banks including the said Bank from Andhra Bank. He states that in all his transactions the counter party that was being reflected was Andhra Bank and payments and receipts were being routed through his Current Account No. 4819. He states that between 1st April, 1991 to 31st March, 1992, he has purchased from the said Bank securities, Units, Bonds, PSU Units of an aggregate value of Rs. 1200/- crores and has sold to the said Bank such securities, etc. of an aggregate value of Rs. 1700/- crores. He states that payments and receipts thereof were made and/or received in his aforesaid Current Account No. 4819. He states that the four cheques Exs. B, C, D & E related to certain intended transactions of purchase of securities by him from the said Bank. He states that none of these intended transactions actually materialised and as a result the cheques were never to be acted upon or encashed. He states that the cheques dated 24th and 26th December, 1991 and 17th February, 1992 were given towards intended purchase of Units of UTI, whereas the cheque dated 27th march, 1992 was given towards the intended purchase of Units of Can Star and Can Premium. He states that as all negotiations in respect of transactions in securities were oral and decisions were being taken within minutes or hours, he was not in possession of any documentary evidence. He states that all the accounts were maintained by the Officers in the Treasury Division of the said Bank and he has no knowledge of those accounts nor any access to the same. He states that between 1st November, 1991 and 6th April, 1992, on account of this arrangement, he has paid from time to time Rs. 94,72,37,332.22 to the said Bank which is in addition to the sum of Rs. 15/- crores paid on 16th December, 1991. He states that on a correlation of the amounts paid by him and the Deal Slips (part of Exs. O, P & Q), the amounts paid by him correlate and tally with some of the amounts now sought to be claimed under Exs. O, P & Q. He submits that he is not liable to pay any amount towards differences in Contract Rates and Delivery Rates as mentioned in Exs. O, P & Q. He states that if any such liability did exist the total amount due to the said Bank under Exs. O, P & Q (excluding Rs. 15/- crores) correlates with the amounts paid by him under the aforesaid arrangement. He states that whenever there are ready forward transactions, by the very nature of the transactions, the entire amount due to or available to the said Banker would be squared off. He states that the transactions mentioned in Annexure II are ready forward transactions. He states that all these transactions have been duly reversed by the said Bank, and hence there cannot be any liability for payment of any sum in respect of such transactions. He states that on 9th May, 1992 the said Bank has purchased 3.5 crores Units of Can Triple from him valued at Rs. 205/- crores for which he has not received consideration. He states that on a proper taking of accounts, there is every likelihood of his being a creditor of the said Bank. In respect of four cheques he states that on 23rd December, 1991 he was interested in purchasing on his own account Units of UTI. He states that he was informed that the said Bank would be in a position to immediately deliver 1.35 crores Units valued at Rs. 18.09 crores for which he paid the cheque which was duly encashed. He states that another cheque for Rs. 13.50 crores was delivered for purchase of additional one crore Units, but the Bank did not do any deal and the cheque was cashed towards adjustment/re-structuring. He states that in respect of cheques dated 24th and 26th December, 1991, on 23rd December, 1991 he informed the said bank that he wanted to purchase further Units. He states that in anticipation of the purchase, in the course of 23rd December, 1991, he sent one cheque for Rs. 27/- crores and another cheque dated 26th December, 1991 for Rs. 14.50 crores. He states that these were for purchase of 2 crores and 1.08 crores Units on the respective dates at the rates of Rs. 13.50 per Unit and Rs. 13.40 per Unit. He states that on 24th December, 1991 Canfina wanted to buy 2 crores of Units and as the said Bank was holding a Bank Receipt for 2 crores Units of Canfina, the said Bank preferred to square off the same with Canfina and hence the transaction was not done with him. He states that he agreed to the sale being done directly to Canfina by the said Bank. He states that on 26th December, 1991, Citi Bank offered to purchase 3 crores Units at the rate offered by him and as the said Bank wanted to sell more Units, he agreed to give up the transaction and as such the intended transaction for sale of 1.08 crores Units with him did not materialise. He states that on 17th February, 1992, he had with him 80 lakh Units. He states that on that day Canfina wanted to purchase 2 crores Units. Initially he decided to purchase the balance Units from the said Bank and sell the total quantity to Canfina. However, when he approached the said Bank, he was informed that they were holding a Bankers Receipt of Canfina for 2 crores Units. He states that the said Bank preferred to return back this Bankers Receipt and hence the transaction was done directly with Canfina. He admits that he was a broker of Canfina in this transaction and that this transaction was done on 18th February, 1992. He states that 80 lakh Units which were held by him were sold to the said Bank on 18th February, 1992, as the said Bank had agreed to buy these from him. He states that it was for the intended transaction of 1,22,50,000 Units that on 17th February, 1992 he had issued and given his cheque for Rs. 17 crores. He states that on 17th March, 1992, he wanted to purchase Rs. 7/- crores worth Units of Can Star and Rs. 10/- crores worth Units of Can Premium. He states that the said Bank had purchased these Units from Grindlays Bank. He states that he had issued his cheque for Rs. 19,95,75,000/- for this intended purchase. Meanwhile he received a request from the Citi Bank for purchase of these Units. He, therefore, requested the said Bank to do the deal directly with the Citi Bank and the same was done on 28th March, 1992. He states that in these circumstances, none of the intended transactions in respect of the aforesaid cheques had taken place and that the cheques were not to be encashed and were required to be returned. He states that the cheques were delivered by his staff to some one in the Bank. He states that under the circumstances the cheques Exs. B, C, D & E were not for discharge of any debt or liability. He states that he was never told about the presentation. He states that since he was not liable for the amounts mentioned in the cheques, there was no question of maintaining a balance equal to the amounts of these cheques.
47. By his additional Written Statement he merely corrects the figure of Rs. 94,72,37,. 332.22 to Rs. 87,93,77,332.22.
48. Thus the defence on merits as disclosed in the Written Statement is that the Deal Slips are not maintained in the regular course of business, that there was some restructuring or arrangement undertaken by the Bank pursuant to which, from time to time, he was called upon to pay amounts to the Bank and in respect of which he has paid Rs. 87,93,77,332.22 to the Bank. The defence is that there is no liability in respect of differences in rates. The defence is that the four cheques Exs. B, C, D & E were given for the intended deals set out in the Written Statement. The defence is that the deals not having been materialised, the cheques should have been returned to him.
The evidence on behalf of the prosecution has been as follows:
49. Mr. Derek Reed (PW1), the Group security Adviser and barrister-at-Law deposed that he is based in London but that he came to Bombay on 17th May 1992 with instructions to investigate a huge fraud in Bombay. He has deposed that after coming to Bombay, he started investigation and that apart from him there were teams which had been set up for the purposes of unraveling the fraud. He deposed that he met Mr. Arvind Mohan Lal soon after he arrived in Bombay. He deposed that on 19th May, 1992, he went with Mr. Arvind Mohan Lal to the latter's desk where in his presence he cleared the desk of Mr. Arvind Mohan Lal of a variety of documents. He deposed that amongst those documents were the four cheques Exs. B, C, D & E . He deposed that on the next day, he handed over these cheques to an officer of the said Bank for the purposes of having an enquiry made as to whether the cheques should be presented to Andhra Bank. In cross examination, this witness admitted that he has no personal knowledge as to why the cheques were in the possession of Arvind Mohan Lal. The further cross examination of Mr. Reed Derek Sidney was on the cheques being found in the drawer of Arvind Mohan Lal. He denied the suggestion that Arvind Mohan Lal had not told him that these cheques had been issued by the accused in respect of the monies owed to the said Bank.
50. S. Gynanavinayagam (PW2) is the Manager, operations in Andhra Bank. This witness has deposed that in May 1992, the accused was maintaining Current Account No. 4819 with the Andhra Bank. He deposed that the cheques were presented for payment and dishonoured for the reason 'insufficient funds'. He deposed that these cheques were presented and returned dishonoured on 21st May, 1992. He has also produced the statement of account of the accused which has been marked as Ex. A. In cross examination of Mr. S. Gynanavinayagam it was put to him that no intimation had been sent to the accused about the dishonour of the cheques. He stated that he had no personal knowledge whether or not any oral intimation had been sent.
51. Mr. Bratindra Nath banerjee (PW3) is the Director of India Task Force. The evidence of this witness has been the object of great debate and comment. Therefore even though unusual, it may be convenient to set it out in detail in the judgment. He deposed that the said Bank has an Investment Banking Division which amongst other things managed the Banks Statutory Liquidity requirements and also traded in Public Sector Bonds and Units of Unit Trust of India. He deposed that most of these transactions are done through brokers. He deposed that he knew the accused Hiten Dalal. He deposed that according to the Bank's records, the accused Hiten Dalal had been the broker in the Bank's security transactions from around march 1989. He deposed that it had been reported at the Head Office in London, by the Chief Executive in Bombay, that there was a big fraud in the Investment Banking Division in Bombay. He deposed that he alongwith the team came to Bombay. He deposed that alongwith his colleagues he investigated all the transactions undertaken by the Division. He deposed that in such investigation, they discovered that there had been a huge fraud. He deposed that during these investigations , he met the accused who came in the evenings and some times in the afternoons. He deposed that the accused discussed various proposals as to how he would make good the money. He deposed that there were two main areas of fraud. The first was where at the instance of the accused or through him the Bank had paid out large amounts but had failed to receive the securities or valid Bank Receipts in respect of those amounts. He deposed that the second was pertaining to the purchase and sale of securities at the instance of the accused. He deposed that some times the purchase rates would be different at the time of delivery from the contract rate. He deposed that he had occasions to question the accused in respect of these frauds. He deposed that the accused always admitted that there was a huge shortfall in securities or valid Bank Receipts. He deposed that this admission was in respect of transactions done through the accused. He deposed that the accused admitted the fact that large payments had been made at his instance or through him without adequate security or Bank Receipts having been received. He identified the signatures of the accused on all the four cheques. He deposed that he was familiar with the signature of the accused. The four cheques were then taken on record and marked as Exs. B, C, D & E. He also deposed that these cheques were found in the drawer of Arvind Mohan Lal. He deposed that these cheques were presented to the Andhra Bank on 21st May, 1992 and were dishonoured with the remark 'not arranged for'. He deposed that in the banking practice, this would mean 'insufficient funds'. He then gave evidence about the correspondence which was exchanged between the parties. The letters have been marked as Exs. F, G, H, J, K, L, M & N. He deposed that they had checked up the books of account for the purposes of ascertaining the correct position regarding purchase and sale, at rates different from the contracted rates. He deposed that he had prepared a statement pertaining to the transactions between 8th November, 1991 and 18th December, 1991. He deposed that this statement showed the Contract Rates, the Delivery Rates, the rates of difference and the amount of difference. He deposed that this statement is supported by the Deal Slips attached to this statement. He also produced certain cost memos, the advice issued by the Reserve Bank of India and an entry in a clearing sheet in respect of four Deal Slips. He indentified the hand writing of various parties on the various Deal Slips. The statement alongwith Deal Slips, cost memo, Reserve Bank of India advice and clearing sheet were marked as Ex. O (Colly.). He clarified that out of Ex. O (Colly.). 4 Deal Slips (where the difference in rates amounted to Rs. 15 crores) had been settled by the accused by giving a cheque for Rs. 15 crores. He deposed that on this count, upto 26th December, 1991 the total liability of the accused was Rs. 60,77,40,250/- less the amount of Rs. 15 crores which had been received, i.e. the net amount of Rs. 45,77,40.250/
52. He deposed that in respect of transactions between 28th December, 1991 and 17th February, 1992, there was a total liability of Rs. 56,50,50,000/-. In respect of this, he brought with him a statement showing the transactions supported by 18 Deal Slips. This statement alongwith the Deal Slips is marked as Ex. P (Colly.) He further deposed that he had checked up the liability for the period 21st February, 1992 to 27th March, 1992 and that on this count, the liability was Rs. 30,97,34,135/-. He produced a statement alongwith 5 Deal Slips. That statement alongwith 5 Deal Slips has been marked as Ex. Q (Colly.). At this stage it must be mentioned that in respect of the figures given in Ex. P on 2nd November, 1992, the witness on his own clarified that the correct figure was Rs.39,50,50,000/-. The corrected statement was handed in which was marked as Ex. T. At this stage it must also be noted that Exs. O, P, Q and T were marked without any objection.
53. He then deposed that in all these Deal Slips the column 'Rate' showed the contract rate. He deposed that if a delivery rate is different, it would be entered under the column 'Remarks' and shown as delivery at such and such a rate. He deposed that in all slips produced by him, in the remarks column, there was a different rate of delivery. He deposed that in all these Deal Slips, in the column 'Broker', the word 'DIR' has been mentioned. He deposed that since late 1990, in respect of all transactions where the accused was the broker, in the column 'Broker' the word 'DIR' had been used. He deposed that all the transactions under Exs. O, P & Q were done at the instance of the accused. He deposed that the said Bank had no other relation or transactions with the accused, except security transactions. He deposed that all Deal Slips are printed forms. He deposed that they bore pre-printed serial numbers and every transaction in securities would start by first filling in Deal Slips. He deposed that the Deal Slips are prepared by the dealers in the Front Office of the Investment Branch. He deposed that the idea of serially numbering each Deal Slips to ensure that every slip is accounted for. He deposed that usually at the end of a month, all Deal Slips are collected serially and then bound. He deposed that even if the transaction in respect of a Deal Slip was cancelled, still that Deal Slip would be preserved and bound up serially. He deposed that some times it may happen that in the course of a sale transaction, the Bank may receive more money than that indicated in the contract. He deposed that in that case the difference would be paid to the broker. It might conveniently be mentioned here that in the cross examination the witness was called upon to produce two cheques which had been paid by the said Bank to the accused. He then deposed that a sum of Rs. 8 lakhs had been paid on 21st March, 1992 and a payment of Rs. 50 crores had been made on 6th April, 1992. He deposed that this payment of Rs. 50 crores was towards the rate of difference. He deposed that some times in case of purchase, the Bank might pay less than the contract rate. Thus the statement of the accused that some times payments may be made to the broker because the Bank had received more money than that indicated in the contract is borne out by the cross examination itself. It has been shown that in respect of difference in the contract rate and the delivery rate, the accused at least received these amounts from the said Bank. These were in respect of his transactions with the Bank.
54. He deposed that in the books of account of the Bank, there were records of amounts having been paid by the accused and adjusted against other liabilities in respect of other transactions. He deposed that in respect of transactions where the Bank had paid large amounts but had not received relevant securities or valid Bank Receipts the liability of the accused at the end of December, 1991 was in a sum of Rs. 300 crores and that it subsequently grew and by the end of March went upto Rs. 1240 crores. He deposed that the cheques Exs. B, C, D & E were issued by the accused in respect of the liabilities towards the said Bank under the security transactions. He was then shown a portion of letter Ex. J wherein the accused had contended that certain cheques were given which were never to be acted upon because on account of subsequent cancellation of deals. He deposed that he had gone through all the Deal Slips for the entire period and that he had got them present with him in Court and that in none of the Deal Slip books there is any slip in which the transaction has been cancelled as reflected by the 4 cheques. He deposed that the statement of the accused was totally false and that there was no intended deal. He was similarly shown other paras of Ex.J. He deposed that he had checked up the entire records and that there was no deal which had been cancelled as claimed. He deposed that he had filed this complaint on behalf of the said Bank. It might only be mentioned that this statement has not been challenged at all in cross examination.
55. In cross examination he was asked about the Task Force and his role in Task Force. He deposed that his role was largely co-ordinating and supervising the investigation. He denied the suggestion that he was not personally looking after the transaction. He deposed that if somebody found something was not alright, he would then look into it to ascertain everything was alright. In answer to a question, he deposed that he had already brought on record various documents showing differences in rates. He also deposed that there were cases where the Deal Slips would be showing transactions with a particular Bank whereas the Banker's Receipt would be received by some other Bank. He denied the suggestion that these cheques were given towards the short-fall which forms the subject matter of the F.I.R. It might only be mentioned that the F.I.R. is in respect of the alleged fraud of Rs. 1240/- crores. The witness honestly answered that he had no personal knowledge as to how the said cheques came into the possession of Arvind Mohan Lal. He stated that from the Bank's records pertaining to the transactions of the accused with the Bank it could be seen that the accused had discharged certain liabilities of his to the Bank by giving cheques. He admitted that he had not personally scrutinised all the transactions of the accused with the Bank. He explained that these were so vast that it was not possible for any individual to scrutinise all these transactions. He deposed that he personally scrutinised the transactions of the accused pertaining to these four cheques. He was asked whether he was aware that between 1st December, 1991 and 15th May, 1992 a large number of cheques were handed over by the accused to the Bank and whether these cheques were deposited by the Bank in their account. He answered that he was aware that the accused had given cheques. He stated that he himself had produced one such pay order. He deposed that if the accused wanted to show that he had discharged his liabilities, a statement of all cheques paid should be given to him. He deposed that he would then come back to Court and make further statement. It may only be mentioned that no such statement was given to the witness. This obviously because it would then have been shown that all payments made by the accused have been already credited and adjusted towards other liabilities. He was then asked whether he knew what was the total amount of the cheques given by the accused between 1st December,1992 and 15th May, 1992 (apart from the four cheques Exs. B, C, D & E). He answered that he had not personally scrutinised the Bank's records of the Bank to find that out. He admitted that nobody had brought to his notice the exact amount of the cheques given by the accused between 1st December, 1991 and 15th May, 1992. He stated that this was because there was no dispute in respect of the other cheques and that the only dispute was in respect of the other cheques and that the only dispute was in respect of the said four cheques Exs. B, C, D & E and the amounts due thereunder. He admitted that he was aware of the Special Court Ordinance being passed. He admitted that he was aware that under the provisions of the Ordinance, there was attachment of the property. He admitted that he knew the accused was one of the Notified Persons and that his properties were attached.
56. Mr. Bratindra Nath Banerjee was thereafter further cross examined. During the cross examination he deposes that between 1977 and 1984 he was working in Bombay in the Branch Office and in the Corporate Office. He deposed that in the Corporate Office he had worked as a head of Marketing and later on as a Chief Financial Officer. He deposed that in the Branch, he had worked between 1982 and 1983. He deposed that he had gathered the information regarding the two areas of fraud from others as well as from the records. He added that he has personally seen the records. He stated that he has gone through all the relevant records in respect of this complaint. He deposed that the nature of the fraud set out by him is on the basis of the study of the records and from what he had heard from others. He clarified that others include people whose services are terminated. He admitted that they would include Mr. Arvind Lal, Mr. Jaideep Pathak, Mr. Manoj Rane, Mr. V. Srinivas, Mr. S. Mulgaonkar, Mr. B. Shivkumar, Mr. P.S. Nat and Mr. Ravi Iyer. He deposed that during the course of investigation in addition to this, he may have spoken to some persons from other Banks. He deposed that he had come to the conclusion as to the precise nature of fraud on the basis of the documents and from what he heard from others. He deposed that his conclusion as to the person responsible for fraud, i.e., the accused was on the same basis. He deposed that before naming any person as an accused, he had carefully scrutinised the records to ensure that an innocent person was not named as an accused. He deposed that round about 19th or 20th all the dealers were removed from the department. He deposed that Mr. Rane had left the department in January 1992. He deposed that Mr. Srinivasa was put into the team formed for the purposes of analysing the transactions during investigation. He deposed that Mr. Shivkumar was also transferred to the same team. He deposed that they were working under one Mr. Wasim Saifee who was working under him. He deposed that he could not say whether all these persons named by him were available and accessible in Bombay. He admitted that Mr. Shivkumar is still in the service of the Bank. He deposed that he had collected information from the dealers. He deposed that some time he saw records first and then asked questions to the dealers and some times he looked at the records after talking to the dealers. He deposed that some times the dealers came to his office and some times he went over to the place where they were sitting. He deposed that the research was done by the team including Mr. Saifee. He denied the suggestion that he had looked only at computer statement. He asserted that Mr. Saifee would bring to him the Deal Slips, vouchers etc. He deposed that the results of the enquiry was reduced to writing by way of reports. He deposed that there would be various reports from various people looking at it from various angles. He also admitted that the flow charts were prepared on computer by the team headed by Mr. Saifee. He deposed that the records which he had seen were Deal Slips, vouchers, cost memos, registers, etc. which were all original Bank records. He deposed that apart from the flow charts and the original Bank records, Mr. Saifee had not placed anything else before him. He deposed that apart from the Bank records and the flow charts, no other document was placed before him even by the other members of the team. He admitted that none of the dealers were sitting in his room or in front of him and writing documents. He admitted that none of the dealers had written anything in front of him. He admitted that he had not exchanged any inter-office memos with members of the team. He is then cross examined about the identification of hand writing and he states that he had identified the hand writing and signature by comparing it with other hand writings. In cross examination, he is shown para 4 of the complaint and it is suggested to him that the last sentence in that para relates to these four cheques. He denies the suggestion and answers that he clearly remembers about which securities he had discussed with the accused. He insists that there was no question of the last sentence in para 4 of the complaint relating to these four cheques. He deposed that he had made the statement about the accused being a Broker of the Bank on the basis of the Deal Slips. He deposed that in the Deal Slips upto December, 1990 there is evidence to show that the deals were through the accused. He deposed that all the Deal Slips bear the letters 'HPD'. He deposed that there are some records which show that the accused was a broker in the Bank security Transactions even after December, 1990. He deposes that after December, 1990 the accused has not been shown as a broker in the Deal Slips. He deposed that there are other records of the Bank which show that the accused acted as a broker. He deposed that the other records are letters from the accused which are on his letter heads, in his own hand writing and signed by him. He deposed that there were also cost memos from other Banks mentioning the accused as a broker. He admits that the cost memos would show that the accused is a broker of other Bank but he adds that he could be a broker for both the Banks. He deposed that the name of the accused also appeared in the Bank vouchers and in the Registers of the Bank. He states that the books of account referred to by him on pages 14 and 19 of the Notes of Evidence are the Deal Slips, Registers and the Vouchers. He admits that the Bank maintains a ledger and in that there is a current account of the accused. He deposed that in the Treasury Division there are no broker-wise ledger accounts and the ledger account of the accused is a current account. He deposed that the arrangement with accused and with other brokers was that any brokerage must be built into the price of the security itself. He deposed that in respect of transactions where the accused was a broker, the Bank would have to pay him the brokerage, but he did not know how the accused received that brokerage. He deposed that the brokerage would be built into the price. He deposed that presumably the brokerage will be paid by the other Bank. He states that his Bank did not pay brokerage. He deposed that some time the transactions were routed through other Banks and those Banks would then take out the brokerage and pay to the broker. He deposed that in respect of transactions with the accused a large number of transactions had been so routed. He affirmed that the four cheques Exs. B, C, D & E were given towards the liability of the accused to the Bank in respect of differences in Contract Rates and Delivery Rates. He answered that the amounts of the cheques do work out to the differences in Contract Rates and Delivery Rates. He deposed that the said Bank claimed these cheques towards discharge of this liability, i.e., the liability towards differences in Contract Rates and Delivery Rates under Exs. O, P & Q. He is then asked about the internal control system. He explains the same and deposes that the main accounts of the Bank are maintained on computers. He states that this would include the accounts of the Treasury Division. He deposed that he had personal knowledge as to manner in which main accounts of the Bank were maintained on computers. The witness is then called upon to produce particulars of any bankers' cheques which had been given to the accused. On the next day the witness got copies of certain Deal Slips, vouchers and two cheques. The cheques were made out in the names of Banks. He however deposed that the vouchers mentioned the name of the accused. The cheques were in respect of payment of a sum of Rs. 8 lakhs and a sum of Rs. 50 crores. The witness deposed that this amount of Rs. 50 crores had been paid towards rate differences and that the cheque had been drawn in favour of Bank of Karad. He is then cross examined in respect of the Item 'Effective Yield' in various Deal Slips. He deposed that these were used in Ready Forward Transaction as a ready forward transaction was funding transaction. He is then shown certain Deal Slips and asked questions on those Deal Slips. He denies the suggestion that those Deal Slips contain the counter parts of the Ready Forward Transactions in some of the Deal Slips in Exs. O, P & Q. He admits that during the period November, 1991 to March, 1992, there were Deal Slips where the letters 'DIR' is mentioned but they are not transactions put through the accused. It must however be mentioned that this question was not asked with reference to Exs. O, P or Q. He admits that the accused has been notified. The Gazette dated 8th June, 1992 was marked as Ex.1. The cross examiner suggested that various Deal Slips were Ready Forward Transactions. The witness denied the suggestions. The witness is shown para 17 of the F.I.R. wherein it has been mentioned that these four cheques were deposited to reduce the loss of the Bank. he replied that the F.I.R. did not say which losses and that the F.I.R. did not say that the losses which were to be reduced were specified in F.I.R. Para 17 of the F.I.R. is taken on record and marked Ex. 4. The witness admits that some of the Deal Slips prepared by the Bank would not be in the ordinary and normal course of business. He states that this is because there has been a fraud and obviously some Deal Slips would be suspect. He admits that as he was not present during the relevant period.
57. Mr. Arjun Goswami (PW4) produced a copy of the account of the accused with the said Bank. This was duly certified under the Bankers Book Evidence Act.
58. Mr. Bipin Bijoy Sunadhar (PW5) produced the entries for the month of June in the account of the accused with Andhra Bank.
59. This was the evidence on behalf of the prosecution. The defence have led evidence of Mr. Gajanan G. Bairwa, Mr. Sanjay K.K. Sareen and Mr. Jai Lal Kaushal as production witnesses. They have led evidence of Mr. Ramesh Laxman Kamat (DW1) and Mr. Sriker Rao Ananthayya Rao (DW2) for purposes of proving that certain transactions in Exs. O, P and Q were ready forward. The evidence of Mr. Kamat has been dealt with in great detail in this judgment. The evidence of Mr. Rao is considered whilst dealing with various aspects. Defence has also led evidence of one Mr. Gurucharan Dass Bhalla (DW3). He is the Chief Manager of Andhra Bank, Fort Branch. Through him 21 cheques drawn by the accused in favour of the said Bank have been produced. These are marked as Ex. 22 (Coll.) and Ex. 23 (Coll.). Defence has also led evidence of one Mr. Ganesh C.K.C. Talukdar (DW4). He is a staff Officer in Reserve Bank of India. He has produced a sale and purchase price list issued by the Reserve Bank of India. This is marked as Ex. 26. The submissions in respect of the cheques (Exs. 22 and 23) and the R.B.I. List (Ex. 26) are dealt with hereafter. On behalf of the accused Application Ex. 20 was filed on 10th March, 1993. That is dealt with by order dated 11th March, 1993. On 17th March, 1993 application Ex. 27 is filed. That is disallowed by order dated 17th March, 1993.
60. It is the case of the defence that the Deal Slips have not been proved. It is submitted that PW1 and PW3 have no personal knowledge and cannot depose as to the real state of affairs. Mr. Ovalekar submitted that the Deal Slips had not been proved through witnesses who would have had personal knowledge and as required by law. He submits that the Deal Slips must be demarked. He submitted that in any event the contents of the Deal Slips are not proved. In support of this submission, Mr. Ovalekar relied upon the authorities in the cases of (Madholal Sindhu v. The Asian Assurance Co. Ltd.), reported in 56 Bom.L.R. 147; Sir Mohammed Yusuf v. D., reported in : AIR1968Bom112 ; Bishwanath Rai v. Sachhidanand Singh, reported in : AIR1971SC1949 ; Sait tarajee Khimchand v. Yelamarti Satyam, reported in : AIR1971SC1865 ; Sanjay Cotton Co. v. Omprakash Shioprakash, reported in : AIR1973Bom40 ; Ramkrishna Ganpat Futane v. Mohammad Kasam, reported in 1973 M.L.J. 511; Ramji Dayawala & Sons (P) Ltd. v. Invest Import, reported in : [1981]1SCR899 ; Prakash Cotton Mills Pvt. Ltd. v. Municipal Commissioner For Gr. Bombay, reported in 1982 M .L.J. pg. 840; Om Prakash Berlia and another v. Unit Trust of India and others, reported in 1983 M.L.J. pg. 339 and A.V.S. Perumal v. Vadivelu Asari, reported in : AIR1986Mad341 . The principles enunciated from these authorities is that proof of hand writing does not amount to proof of contents of the document and that even though a document may be marked by consent, still that would not amount to admission of the truth of the contents. The authorities lay down that the truth of the contents has to be proved independently. This even in cases where secondary evidence is permitted. The truth of the document has to be separately established and merely because a document is exhibited does not by itself prove its contents.
61. As against this, Mr. Menon has relied upon the authorities in the cases of Jagannadhadas v. Govinda Menon, reported in 1957 Cr. L.J. 1346; Ajjarapu subbarao v. Pulla Venkata Rama Rao, reported in : AIR1964AP53 ; p.c. Purushothama Reddiar v S.Perumal, reported in : [1972]2SCR646 ; Kanchanganga Co. Ltd. v.The State of West Bengal, reported in : AIR1973Cal325 and Harnath Malhot v Dhanoo Devi Agarwala, reported in : AIR1975Cal98 . Relying on these authorities it is submitted that once a document is admitted in evidence without any objection, the contents of the document, though not conclusive, are also admitted. It is submitted that these authorities establish that once the party against whom the documents are tendered has waived proof of those documents, then they cannot be allowed to object to those documents. Mr. Menon also relied upon the authority of the Supreme Court in the case of Ram Janki Devi v. Juggilal Kamlapat, reported in : [1971]3SCR573 . He submitted that this also shows that once the defendant uses documents for the purposes of cross examination and testing them, then he cannot object to those documents. He also relies on this authority for the proposition that once it is shown that the books of account are properly maintained, they could be proved even in the absence of the writer. Mr. Menon submitted that in law, there was no obligation on the prosecution to prove any debt or liability. He submits that the prosecution has still proved the debt or liability. He submits that in any event the prosecution has identified the debt or liability and the accused has failed to discharge the burden of showing the contrary, i.e., that there was no debt or liability as indicated.
62. In my view, the authorities cited by both the sides are consistent. In law there is no provision for demarking or unmarking documents which are admitted in evidence. Once a document is marked either without objection or by consent, it forms the record of the Court. Then not only the document but its contents also form record of the Court. The Court is thus entitled to consider that document. What value is to be placed on the document depends upon the evidentiary value that can be attached to that document. That would vary depending on facts of each case. However merely because documents and its contents are admitted on record does not mean that the truth of the contents is also proved. To take a very simple example, suppose 'A' writes a letter to 'B' stating that he had gone to Pune and such a letter is admitted in evidence without objection or by consent. Then the letter forms part of the record. It is proved that such a letter was written by 'A'. The contents are also on record i.e., that the letter says that 'A' had gone to Pune. But it is not proof of the fact that 'A' had actually gone to Pune. That must be independently proved. Also if an opposite party cross examines on the contents of the document, then that only increases or decreases the evidentiary value of that document.
63. In this case Exs. O, P & Q have been admitted in evidence without any objection. They now form record of the Court. They cannot be demarked as contended by Mr. Ovalekar. The evidentiary value of the Deal Slips would depend upon the appreciation of the evidence. This is dealt with hereafter. At this stage it may only be mentioned that I am in agreement with Mr. Menon when he contends that Deal Slips are part of accounts of the Bank. This is clear because there is unchallenged evidence that all Deal Slips are serially numbered, all transactions are recorded on Deal Slips and even if a Deal Slip is cancelled, the Deal Slip would still be preserved. The Deal Slips are then bound and kept on record of the Bank. Also as is seen in the cross examination, apart from these Deal Slips and Register, there is no other records of the Bank (except what is maintained on the computer). These, therefore, are the records pertaining to the accounts of the Bank. Also in my view, in this case it is not necessary that the writers of these Deal Slips should have been examined. The reasons for this are set out hereafter when I deal with the question of adverse inference. Under section 65(g) of the Evidence Act, when the original consists of numerous records or other documents which cannot conveniently be examined in Court and the fact which has to be proved is a general result of the whole collection, then secondary evidence of the existence and contents of documents can be given. The explanation to this section makes it clear that under sub-section(g), evidence can be given of the general nature of documents of any person who has examined them and who is skilled in the examination of such documents. In this case, in my view, the evidence given by PW3 is under section 65(g). It is not disputed that apart from other qualifications, PW3 has had more than 24 years of experience in the banking field in India and other countries. Also it is on record that between 1977 and 1984, he had worked in Bombay in the Branch Office and in the Corporate Office of the Bank. In the Corporate Office he has worked as a Head of the Marketing and later as a Chief Financial Officer. He had also worked in the India Treasury Division between 1982 and 1983. It is also on record that he was in the Treasury Department for a number of years. This witness has deposed that he had been sent to Bombay, after discovery of fraud, for the purposes of looking into it and making an investigation. He had gathered the information on the basis of personally looking at all relevant records in respect of this complaint. His deposition is on the basis of study of records and from what he had heard from others. He has deposed that he had carefully scrutinised the records in order to ensure that no innocent party was named. This has not been shaken in cross examination. It is not challenged or disputed that the main accounts of the Bank would be are maintained on computers. The Court found this witness to be truthful. He has time and again admitted facts. This without any hesitation or prevarication even though those facts may seem to be against the case of the prosecution. It was clear to the Court that he had no malice towards the accused. Also this witness had been cross examined in detail about the knowledge gained from the examination of records. Many of the questions were pertaining to records maintained by the Bank and the knowledge gained by this witness from the records. On occasions he was asked to check up the record. He has done that also. He also been cross examined on various Deal Slips out of Exs. O, P & Q. At one stage he was made to go through all the Deal Slips between November 1991 and March 1992. He was also made to cross check Deal Slips Exs. O, P & Q with various other Deal Slips. This sort of cross examination could only be on the basis that these were records of the Bank and that this witness had gained knowledge out of an examination of the records. Thus even if the burden of proof was on the prosecution, in my view, they have discharged the same.
64. However as set out hereinabove, in a case under section 138 of the Negotiable Instruments Act, the prosecution does not need to prove any debt or liability. There was, therefore, no necessity to prove any of the Deal Slips. Even if the Deal Slips were not proved, they could still be used merely for the purposes of identifying the debt. Of course once the prosecution has chosen to have these Deal Slips admitted in evidence, the accused can use it and ask the Court to draw inferences based on them.
65. Mr. Ovalekar submitted that no person who had personal knowledge about the changes in Deal Slips and about how, why and when the cheques were given was examined by the prosecution. He submitted that the person who would have personal knowledge about how, why and when these cheques were given was one Arvind Mohan Lal. He submitted that the dealers may also have had knowledge. He submitted that none of these persons have been examined. He submits that the prosecution has purposely kept back evidence of persons who had personal knowledge. He submits that the Court must necessarily draw an adverse inference that, the evidence of these persons, had it been lead, would have established that there was no liability of the accused. He points out that in the list of witnesses alongwith the complaint, the name of Arvind Mohan Lal and Ravi Iyer appear at Sr. Nos. 1 and 2. He submits that the evidence of these persons was absolutely necessary and essential not only to show how, why and when these cheques were given but also to explain how there are alterations and changes in the figures in the Deal Slips. He submits that apart from these changes, there would be no difference and no liability. He submits that this becomes relevant when one keeps in mind the fact that in the correspondence even though the accused repeatedly asked the Bank to indicate the liability,the Bank refused to identify any liability. In this behalf Mr. Ovalekar referred to Exs. F, G, H, K, L, M & N. Mr. Ovalekar submits that it is also relevant that even in the complaint this alleged liability has not been spelt out. Mr. Ovalekar relied upon the authorities in the cased of Narain v. State of Punjab, reported in : 1959CriLJ537 ; Masalti v. State of Uttar Pradesh, reported in : [1964]8SCR133 ; Darya Singh v. State of Punjab, reported in : [1964]3SCR397 ; The State of U.P. v. Jaggo, reported in : 1971CriLJ1173 ; Sarwan Singh v. State of Punjab, reported in : 1976CriLJ1757 ; and Ishwar Singh v. State of U.P. , reported in : 1976CriLJ1883 .
66. On the other hand Mr. Menon relied upon the authorities of the Supreme Court in the cases of Bali Lram Prasad v. State of Mysore, reported in : 1973CriLJ3 ; Moti Lal v.Chandra Pratap Tiwari, reported in : AIR1975SC1178 ; and Dalbir Kaur v. State of Punjab, reported in : 1977CriLJ273 .
67. In my view, there can be no dispute with the general proposition canvassed by Mr. Ovalekar. However, as is set out in the cases of Ishwarsingh (supra) and Sarwan Singh (supra), it is only witnesses essential to the unfolding of the narration on which the prosecution is based who must be examined. It is not the law that an omission to examine any and every witness will lead to the rejection of the prosecution case or drawing of an adverse inference against prosecution. Thus, if the prosecution case has unfolded itself, then non-examination of certain witnesses cannot matter. It is to be remembered that it is within the discretion of the Court as to whether or not a presumption or inference should be drawn. Of course the discretion has to be judicially exercised. What the Court would have to see is whether witnesses material for the purposes of unfolding the case of the prosecution have been unjustifiably withheld. This necessarily depends on the burden of proof. In criminal trials, normally the entire burden to prove the case of the prosecution beyond a reasonable doubt is on the prosecution. All the cases, cited by Mr. Ovalekar were cases where a presumption in law did not arise. In all those cases, the entire burden of proving all facts beyond a reasonable doubt was on the prosecution. It is in those context that the observations relied upon have been made. In my view, the Court would not be justified in exercising its discretion and drawing an adverse inference against a party, when in law there was no necessity to lead evidence. Thus when in law there is no burden to prove a fact, there is also no obligation to lead evidence as regards that fact. In this case all that the prosecution needs to prove is that cheques drawn by the accused in their favour were dishonoured and that in spite of written notice, the amount has not been paid within 15 days thereof. The prosecution does not need to prove that the cheques were given in discharge of any debt or liability. Thus it was not for the prosecution to show how, why and when the cheques were given.
68. In this case, the burden of proving that there was no debt or liability is on the accused. The accused could well have called any of these witnesses as defence witnesses. There was nothing to prevent him from doing so. It must be remembered that even though the accused can discharge a burden on a preponderance of probability, still he must adduce proof. His mere word is not enough. To accept the argument of Mr. Ovalekar would amount to absolving the party on whom the burden lies and casting on the other side an obligation which the law does not impose on it. In such cases no adverse inference can be drawn against the prosecution for not having called evidence to prove the debt or liability. In my view, if at all an adverse inference had to be drawn, it could only be drawn against the party on whom the burden lay, in this case the accused. There is one other reason why an adverse inference cannot be drawn against the prosecution. It is a fact, of which this Court will have to take judicial notice, that there has been a big fraud in the banking system in the country. This Court has been established only because such a fraud has taken place. To Court it prima facie appears that this fraud could not have taken place except with the active connivance of bankers. In this case, the parties who have not been examined are the persons who at the relevant time were dealing in these transactions on behalf of the Banks. In my view, the prosecution was justified in its apprehension that it could not lead evidence of these witnesses. In my view, the apprehension of the prosecution that in all probability these persons were themselves involved in the fraud is justified. For the same reason no adverse inference is being drawn against the accused also for not having led evidence of these parties.
69. Mr. Ovalekar next took the Court through various Deal Slips. He submitted that on a number of Deal Slips in Exs. O, P & Q there have been changes and alterations made in the Contract Rates. He submitted that in most cases the original contract rate as shown on the Deal Slip was the same as the delivery rate. He submitted that there has been no explanation as to when, how and who made these changes and for what purpose. He submits that these Deal Slips are suspicious documents and that it clearly appears that these changes have been made in order to create an artificial liability for the purpose of this trial only.
70. It must be admitted that on a number of Deal Slips, the contract rate has been changed and altered. It is also correct that the original rate was the same as the delivery rate. What the effect of this, is will be taken up a little later.
71. Mr. Ovalekar also submitted that even presuming that there genuinely was a difference, still many of the transactions set out in Exs.O, P & Q were Ready Forward Transactions and that consequently there is no liability of the accused. This because all such transactions would subsequently been reversed.
72. Mr. Ovalekar also submitted that it was not proved that in respect of the transactions under Exs. O, P & Q the accused was the broker. He submitted that the case the accused was the broker is against the terms of the written document itself. He submitted that all these Deal Slips indicated against the column 'Broker' the letters 'DIR'. He submitted that this clearly shows that all these transactions were direct between the Banks.
73. Mr. Ovalekar also submitted that the changed Contract Rates are not comparable to the Reserve Bank of India rates as prevailing at that time. He submitted that this also is an indication that there were in fact no differences and no liability.
74. Based upon all these submissions, Mr. Ovalekar submitted that these factors individually and in totality, render the presumption of existence of a liability sterile from its inception. He submitted that in any event on a preponderance of probability the accused had discharged his burden and shown that these alleged liabilities were non-existent and fictitious.
75. The Court has, therefore, to consider each and every one of these points individually and in their totality. The Court has then to see whether on the basis of preponderance of probability the accused has discharged the burden.
76. The first question which the Court must consider is whether the accused was a broker in respect of the transactions under Exs. O, P & Q. All the Deal Slips contain the letters 'DIR' against the column 'Broker'. There can be no doubt that the ordinary meaning of 'DIR' is 'direct' implying thereby that it is a direct transaction between two banks. However, it is undisputed that the accused was a broker of the said Bank. It is undisputed that the transaction in securities of the said Bank in which the accused was the broker are running into hundred of crores (to use the words of the accused). Before this Court not a single Deal Slip has been brought on record or shown to Court where the name of the accused appears against the column 'Broker'. It is rather pertinent that even though the transactions worth hundred of crores have been entered into by the accused, in his capacity as a Broker, not a single Deal Slip bearing his name could be produced or shown to Court. At this stage, it must be mentioned that, right at the beginning of the trial inspite of protests from Mr. Menon, the Court had directed the prosecution to give to the accused copies of all the Deal Slips for the entire period. Thus the accused had with him, copies of all the Deal Slips. In the written statement the accused has admitted that now he has seen the Deal Slips. Therefore, if it was the practice to put his name in the column 'Broker' he could have shown any number of Deal Slips wherein his name so appeared. The fact that not a single such Deal Slip could be shown or produced establishes that even though the accused acted as a broker, for some reason or the other, his name was not shown on the Deal Slips. This also establishes that in respect of transactions of the accused, some other indication was being used in the column 'Broker'. There is thus no reason to disbelieve PW3 when he stated that the word 'DIR' was used. Also from the evidence of PW3 and the documents on record, it has come out that in respect of Deal Slip Nos. 7630, 7631, 7632 and 7633 the accused had given a cheque for Rs. 15 crores. The sum of Rs. 15 crores tallies exactly with the figure of differences in Contract Rates and Delivery Rates arising under these four Deal Slips. The fact that a cheque for Rs. 15 crores was given is admitted. To the knowledge of the accused, this cheque of Rs. 15 crores had been encashed by the said Bank. It was drawn on the personal account of the accused maintained with the Andhra Bank. As is set out hereinafter, the explanation of the accused in respect of this cheque for Rs. 15 crores is unbelievable and unacceptable. This amount has been adjusted by the said Bank against these four Deal Slips. It is most unlikely and improbable that the accused did not know how this sum of Rs. 15 crores had been adjusted. No protest has been made by the accused in respect of such an adjustment. There appears to be no protest that there was no difference in the Contract Rates and Delivery Rates under aforementioned four Deal Slips. At least no such protest has been brought on record. In my view, this clearly indicates that at least in respect of these four Deal Slips the accused was a broker and that he has accepted liability towards the differences in the Contract Rate and the Delivery Rate. Most importantly in all these Deal Slips the word 'DIR' against the column 'Broker' is written. This establishes that the word 'DIR' was being used in respect of transaction where the accused was a broker. Also it must be remembered that it has not been disputed and it is established in evidence that there can be cases where there would be differences in Contract Rates and Delivery Rates. The case of the accused is not that this never happens. The case of the accused is that in transactions where he was concerned there was no such differences. This case is also belied by these four Deal Slips. It must be mentioned that in these four Deal Slips there are no changes or alterations. Further as is set out in greater detail hereafter, in Exs. 22 and 23 there are a number of cheques for amounts which tally exactly with differences in Contract Rates and Delivery Rates in some of the Deal Slips in Exs. O, P and Q. In all these Deal Slips the words 'DIR' are used. As is set out hereafter, it can't be just a coincidence that on so many occasions cheques for exact amounts of differences would be issued on the same day. As set out hereafter this also indicates that the accused was accepting liability towards such differences. In any event this shows that the accused was concerned with these transactions.
77. As already seen the differences in rates may result either in a surplus or deficiency. If there was a surplus, then it would either be handed over to the broker or kept by Bank. If there is deficiency, then either the broker makes it good or the Bank bears the loss. The story of the accused that in transactions where he was concerned, there never was a difference is also belied by material brought on record during cross examination of PW3 by his counsel. During cross examination PW3 (Page 46 of notes of evidence) brought to Court, pursuant to a notice to produce copies of certain documents and cheques. In respect of a cheque for Rs. 50 crores dated 6th April, 1992 PW3 has admitted that this amount was paid to the accused towards rate differences. This on a question asked by counsel for the accused. This cross examination establishes that in transactions where the accused was concerned there was a surplus. It shows that surplus has been paid by the said Bank to him. If a surplus is paid over to him and accepted by him, then it also establishes that in a reverse situation he would be bearing the loss. In any event it establishes that in transactions where he was concerned there were differences in contract rates and Delivery Rates. The case of the accused that he was not at all concerned with any of the transactions in Exs. O, P & Q is also disproved by other documents which are on record of this Court. The Court has on its record certain Deal Slips which are at Exs. Z32, Z33 and Z34. These are Deal Slips in respect of transactions between the said Bank and Grindlays Bank. The accused has brought on record Deal Slip Nos. 8951, 8954 and 8955 (part of Ex. 2 Colly). According to the accused this showed that some transactions in Exs. O, P & Q were Ready Forward Transactions. The prosecution thus brought Deal Slips Exs. Z32, Z33 and Z34 on record to show that those transactions in Exs. O, P and Q are not Ready Forward Transactions. By these they showed that the said Bank had purchased these securities from Grindlays Bank. In these Deal Slips of Grindlays Bank, the name of the accused is shown as the broker. The Deal Slips of Grindlays Bank show that the accused was connected with these transactions, at least as the broker of Grindlays Bank. His story that he was completely unconnected with these transactions is disproved. This lends further credence to PW3's evidence that the accused was the broker of the said Bank also even though in all these Deal Slips, the word 'DIR' has been used.
78. The accused had examined one Sriker Rao Ananthayya Rao DW2 who is a Manager in the Treasury Support Services of Grindlays Bank. On page 157 of the notes of evidence, in the examination in chief, this witness was asked whether on 27th November, 1991 Grindlays Bank had sold certain Units to the said Bank. The witness answered this in the affirmative. This witness was also asked whether on the same day Grindlays Bank had sold 10 per cent Central Loan 2014 of the face value of Rs. 50 crores to the said Bank. The witness confirmed this transactions also. These questions were being asked in relation to Deal Slip Nos.7290 and 7292 ( part of Ex. O) and Deal Slip No. 7819 (part of Ex. P.). In cross examination on pages 200 and 201 of the notes of evidence, the witness admits that in respect of these transactions, the broker of Grindlays Bank was the accused. In Deal Slip Nos. 7290, 7292 and 7819 the word 'DIR' is used. Thus again the story of the accused that he was unconnected with these transactions is disproved. PW3's evidence that accused was the broker of the said Bank also gets a support from this.
79. For all these reasons the statement of PW3 that the accused was a broker in the transactions under Exs. O, P and Q will have to be accepted. The Court had found the witness to be a truthful witness and it is clear that he had no bias against the accused.
80. The question then arises: why has the accused denied any connection with these transactions? The only plausible reasons appear to be that if the connection was established , then the liability in respect of these transactions would also gets established.
81. At this stage the argument of Mr. Ovalekar regarding the changes and alterations in Exs. O, P & Q must be taken up for consideration. As set out hereinabove, the argument is that these changes and alterations have been made for the purposes of meeting an artificial liability for the purposes of this trial. It must immediately be noted that in a large number of Deal Slips in Exs. O, P & Q there are no changes, e.g. in Ex. O out of 23 Deal Slips, there are changes or alterations only in 10. Thus in respect of 13 Deal Slips which are on record, the contract rate is different from delivery rate without any changes or alterations. As seen these are transactions with which the accused is concerned. In respect of these transactions, there would have been a loss to the said Bank. It is to get over this situation that the theory of Ready Forward Transactions has been put forth. This theory of Ready Forward Transactions is considered later. At this stage it is sufficient to say that it is not acceptable. The connection of the accused to these transactions is established. Thus if the theory of Ready Forward Transactions is not accepted, then liability of the accused in respect of Deal Slips in which there are no changes or alterations to the Bank gets established. His case of total denial of liability no longer survives.
82. Let us now consider some of the Deal Slips in which there are changes and alterations. The total amount of difference under Deal Slip Nos. 7106, 7113, 7114 and 7121, comes to Rs. 2,33,64,000. All these Deal Slips are dated 8th November, 1991. In Deal Slip Nos. 7114 and 7121 there are changes and alterations. The figure of Rs. 2,33,64,000/- is arrived at after taking into consideration the difference arising by reason of such changes and alterations. On record are two cheques dated 8th November, 1991 (part of Ex.22) drawn by the accused in favour of the said Bank. The total of these two cheques come to Rs. 2,33,64,000/-. In my view, it is not just a coincidence that on the same day cheques equaling to the exact amount of the difference have been given by the accused to the said Bank. That this is not a coincidence is clear when one sees that the accused has also given to the said Bank cheques for the exact amounts of differences arising under other Deal Slips. In respect of Deal Slips Nos. 7233 and 7234, both dated 16th November, 1991, the difference in Contract Rate and the Delivery Rate comes to an amount of Rs. 3.50 crores. In both these Deal Slips, this amount is arrived at on the basis of changes made in the Deal slips. On record is a cheque dated 16th November, 1991 (part of Ex. 22) for this exact amount. Again in respect of Deal Bill Nos. 7290 and 7292 both dated 22nd November, 1991 the total amount of difference is a sum of Rs. 60 lakhs. This difference is after taking into account the changes in Deal Bill No. 7290. On record is a cheque dated 22nd November, 1991 (part of Ex. 22) given by the accused in a sum of Rs. 60 lakhs. In respect of Deal Bill No. 7322 dated 28th November, 1991, the difference in Contract Rate and Delivery Rate works out to Rs. 3,82,63,750/-. On record is a cheque dated 27th November, 1991 (part of Ex. 22) for this exact amount. These cheques have been brought on record by the accused. If the changes and alterations were made at a later date, then on the day of entering into the transactions, cheques for the exact amount of differences could not have been issued by the accused. This establishes that the changes and alterations were made on the date of the transaction itself and that the accused has accepted his liability for these differences and paid cheques towards these liabilities. As already stated above and as would be set out in greater detail hereafter, the story of the accused as to why he had given the cheques is entirely unbelievable. In my view , this not only supports but proves the case of the prosecution that the changes and alterations in Deal Slips are at the instance of the accused. This supports the prosecution case that the accused has agreed to make good the loss which the Bank would suffer as a result of differences in Contract Rates and Delivery Rates. This in any case shows that the accused had on the date of transaction itself knowledge that there were changes and alterations and that he had never objected to the same but in fact accepted the same.
83. If as now seen in respect of so many Deal Slips the liability of the accused is established, then why should the evidence of PW3 about the remaining Deal Slips be not accepted. In my view, the above establishes that at the instance of and/or with knowledge of accused changes and alterations were being made in the Deal Slips. It also establishes that the changes and alterations were made on the date of the transactions. Also to be remembered that in many Deal Slips there are no changes or alterations. Thus the submission that changes and alterations must have been made for the purposes of establishing a false liability cannot be accepted.
84. The next submission of Mr. Ovalekar is that a number of transactions in Exs. O, P & Q are Ready Forward Transactions. In the Written Statement, it is claimed that the following transactions out of Exs. O, P & Q are Ready Forward Transactions. These are:-
(a) transactions of 13th December, 1991 under Deal Slip Nos. 7550, 7551, 7552 and 7553;
(b) a transaction of 27th November, 1991 under Deal Slip No. 7322;
(c) transactions of 14th December, 1991 under Deal Slip Nos. 7631, 7632 and 7633;
(d) a transaction of 24th February, 1992 under Deal Slip No. 7620;
(e) a transaction of 12th March, 1992 under Deal Slip No. 8951. In all these the Counter Party is the State Bank of India.
(f) a transaction of 28th December, 1991 under Deal Slip No. 7800;
(g) a transaction of 29th February, 1992 under Deal Slip No. 8742. In these the Counter Party is the Bank of America.
(h) transactions of 16th January, 1991 under Deal Slip Nos. 8017, 8018 and 8019. In these the Counter Party is the Honkong Bank.
(i) transaction of 29th November, 1991 under Deal Slip No. 7402. In this the Counter Party is the Citi bank.
85. The defence that these are Ready Forward Transactions is sought to be supported by cross examination of PW3, and by the evidence of DW1 and DW2. It is also sought to be supported by a theory of four decimal points and on the footing of the contract rate not being in consonance with the prevailing Reserve Bank of India rate.
86. before this defence is considered, one must understand what is a Ready Forward Transaction. On page 48 of the Notes of Evidence, PW3 stated that a Ready Forward Transaction is one where there is a purchase with a pre-arranged sale at a future date or a sale with a pre-arranged purchase at a future date. He states that normally the term 'effective yield' would be used with Ready Forward Transaction, because Ready Forward Transaction is a funding transaction. On pages 94 & 95 of Notes of Evidence DW1 explains that a Ready Forward Transaction can be either a sale or a purchase transaction. He states that when the SLR securities with the Bank are much in excess of the actual requirement and the Bank does not want to keep them in the portfolio, then the Bank would give them to other banks by way of a sale for a fixed period with a commitment to repurchase at the end of the period. He states that a transaction of purchase would be the reverse of this, i.e., if the SLR requirement of the Bank is not sufficient, then the Bank may purchase securities for a fixed period with the commitment to re-sell them at the end of that period. He deposed that in a Ready Forward Transaction, there would be a commitment either to sell or re-purchase at the end of the pre-determined period. This commitment would be made when the transaction is entered into. He deposed that in such cases it is not necessary that the repurchase or the resale price be fixed on the date of the first transaction itself and that it can be fixed when the lending or borrowing rates become known. He then corrects himself to state that the price would be fixed at the stage of the first leg. He does not agree with the suggestion that the Ready Forward Transactions are basically funding transactions. Thus it is clear that in a Ready Forward Transaction, certain securities or Units which are temporarily not required or which are required temporarily would be sold or purchased with a commitment to repurchase or sell them at the end of a fixed period. Therefore, in a Ready Forward Transaction, in the second leg, the same stock of the same value has to be returned. Also it is clear that the Ready Forward Transaction is only entered into for the purposes of meeting SLR requirements. They may also be funding transactions. It must also be mentioned that the evidence shows that at the relevant period there was no restriction on banks entering into Ready Forward Transactions. There would thus be no need for a Bank to try and enter camouflage a Ready Forward Transaction.
87. At this stage the evidence of Mr.Ramesh Laxman Kamat (DW1) should be considered. This evidence must be set out in detail. Through this witness the records of the State Bank of India have been brought on record. This for the purposes of showing that some transactions in Ex.O are Ready Forward Transactions. DW1 is the Deputy General Manager in the State Bank of India. He is a Senior Officer of a Nationalised Bank. One would expect that a Senior Officer of this rank would not come to Court, and tell lies. On almost all points including inconsequential points and points which could not be denied, this witness has prevaricated. He sought the deny the truth until truth could no longer be denied. The evidence of this witness clearly establishes that the records of the State Bank of India have been manipulated so as not to reflect the true position. The evidence of DW1, in my view, instead of helping the accused establishes that the case being sought to be proved by the accused is not correct. DW1 is even at present working in the Money Market Department of State Bank of India. He deposes that as the Deputy General Manager, he would be getting offers from other Banks either directly or through brokers. He deposes that these offers would then be evaluated and if they met the Bank's norms, then they would be treated as in order. They would then be referred to the Bank's Investment Committee. He deposed that if the Committee accepted the offer then the deal will be treated as done and concluded vis-a-vis the other Bank or the broker. Thus it is clear that offers were received from brokers as well as Banks. It is also clear that transactions may be concluded with brokers. As will be shown later on even this simple untenable position was sought to be denied in cross examination. He deposed that after the transactions are concluded, depending upon the size of the deal and in accordance with the delegation of powers, the deal would be submitted to the concerned authorities for approval. He deposed that once the deal was approved, the approval would be conveyed to the Security Department at the Bombay Main office. He then gave evidence about the Ready Forward Transactions which has already been set out hereinabove. He then admits that the accused was not the broker of the State Bank of India. He deposes that there were many transactions between State Bank of India and the said Bank between November 1991 and March 1992. He deposes that between November 1991 and March 1992 the total number of Ready Forward Transactions between State Bank of India and Standard Chartered Bank were 139 purchase transactions and 139 sale transactions. He then deposes that on 27th November, 1991 State Bank of India had sold to the said Bank 11.5 per cent 2010 Central Loan of the face value of Rs. 125 crores. He deposes that the Deal Slip in respect of this transaction was prepared after the offer was received and it was decided to accept it. He deposed that it was authenticated by three members of the Investment Committee and that approval of the concerned authority was also obtained. He produces Deal Slip No. 138. This is marked as Ex. 13. He claims that this transaction was part of a Double Ready Forward Transaction by which there were sales and Purchases of other securities at the same time. He claims that the sale of 11.5 per cent 2010 Central Loan was a Ready Forward Transaction for the period 27th November, 1991 upto 25th February, 1992. He deposes that all the transactions in Deal Slip No. 138 were for the same period. He is then shown a note dated 18th February 1992. He states that note relates to Deal Slip No. 138. That note is marked as Ex. 14. He deposes that the transaction of 11.5 per cent 2010 Central Loan was reversed as per the original commitment and the transaction was squared out. He deposes that as far as he could remember, there were no other transactions in respect of 11.5 percent 2010 Central Loan of the face value of Rs.125 crores between the State Bank of India and the said Bank on 27th November, 1991. He deposes that as far as he remembers that even on the date of reversal, there was no other transaction between these Banks in this security for this amount. He is then shown another note dated 29th February, 1992. He deposes that this note has been prepared by his office and bears his signature. That note is marked as Ex.15. He states that this note also relates to Deal Slip No. 138. He states that the original transaction was to be worked out on 26th February ,1992. But on 25 February, 1992 there were Election to the Bombay Municipal Corporation. The transaction was, therefore, first preponed to 24th February, 1992 and thereafter postponed to 26th February, 1992. He explains that in the note Ex. 15 the letters 'GI' means 'Gross Interest'. After looking at Deal Slip No. 152 dated 12th December, 1991, he states that on 13th December, 1991 there was a transaction for sale of 15.5 per cent 2010 Central Loan of the face value of Rs. 200 crores. He states that this was also part of a Double Ready Forward Transaction. The note in respect of this transaction has been taken on record and marked as Ex. 16.
88. So far the witness has deposed as required by the accused. However as usually happens, when a witness comes to Court knowing that he has to depose to things which are not true, he is never sure as to the extent to which he should go. DW1 now starts having second thoughts as to whether he should continue with this false story.
89. The witness is asked the date on which this transaction of 13th December, 1991 was to be reversed. Deal Slip No. 152 is in front of him. The Deal Slip sets out, what according to the record, is supposed to be the transaction. Yet the witness suddenly says that he cannot identify from what date to what date this transaction is supposed to be. This obviously because at this stage he is having second thoughts as to whether or not to continue with falsehood. Counsel for the accused pursues the line of questioning and shows Ex. 16 (which is the note in respect of deal Slip No. 152) to D.W.1. He is asked to state from the note what the transaction was. He still avoids giving an answer. He does so by saying that he could not identify the transaction. He now says that all that he can make out is that the transactions were for Rs. 550 crores on the purchase date and Rs. 500 crores on the sale date. He is then shown notes dated 12th March, 1992 and 14th March, 1992. He admits that both these are prepared by his office. He admits that both were submitted for sanction and were duly approved. These notes are Ex.17. The notes clearly set out all the transactions which are supposed to have taken place on 13th and 14th December, 1991. D.W.1. still says that he cannot identify the transactions. He now refuses to even say whether there were any other transactions in the same securities with the said Bank on 13th & 14th December, 1991.
90. At this stage the Court's time was over. The trial was adjourned to the next day. The next day counsel for the accused pursues the line of questioning. Even though Counsel was in effect cross examining his own witness without having him declared hostile counsel was given some latitude. The witness was asked to produce letters pertaining to transactions between the said Bank and the State Bank of India on 13 and 14th December, 1991. D.W.1. states that all these are with the Central Bureau of Investigation. The files of the C.B.I. which are lying in Court are shown to the witness. None of the required documents are there in those files. DW1 is again asked to produce the letters. At this stage, he takes up the contention that no notice to produce was given earlier and therefore, he could not produce any documents. He was then asked to produce the documents on the next day. This was objected to by Mr. Menon and the objection was upheld. What transpired in Court has some relevance and is, therefore, being set out. On a question from Court, a summons to produce documents dated 20th January, 1992 was shown to Court. That summons called upon the witness to produce all documents and correspondence in respect of Ready Forward and Double Ready Forward Transactions. In answer to that summons, State Bank of India informed advocates for the accused that all documents pertaining to Ready Forward and Double Ready Forward Transactions were with C.B.I. The files of the C.B.I. were in court. None of the documents pertaining to transactions of 13th and 14th December, 1991 were in the files kept with the Court. Therefore, when the State Bank of India handed over files of Ready Forward and Double Ready Forward Transactions to C.B.I., they did not hand over documents pertaining to transactions of 13th and 14th December, 1991. This clearly indicates that the State Bank of India did not consider the transactions of 13th and 14th December, 1991 to be either Ready Forward or Double Ready Forward Transactions. D.W.1. is then shown 8 letters dated 21st December, 1991. These letters have been marked as Ex.18. The witness admits that these letters had been received by him from the security Department of his Bank. He identifies his initials on all these letters. He identifies the signatures on these letters. He states that the letters are signed by the Manager of the Security Division. He admits that these letters relate to Deal Slip No. 152, i.e., Ex. 16.
91. In cross examination, this witness is asked whether there is any practice whereby a purchasing party would hand over cheques in advance. The witness categorically answers that is never done. He admits that there are restrictions by the Reserve Bank of India, preventing Commercial Banks from dealing in Government securities directly with brokers. He confirms that during this period, there was no restriction or prohibition prohibiting Commercial Banks from entering into Ready Forward Transactions in SLR. He is then asked whether it was possible that in respect of transactions in Government securities, in respect of same securities, two transactions entered into on the same day may be at a widely different Delivery Rates. He answers in the affirmative. He then realises the impact of his answer. he, therefore, qualifies it by saying that this would be in anticipation of a hike in coupon rates and depending upon the market forces. It is then pointed out to him that the qualification made by him would not apply to two transactions entered into at the same time, on the same day and in respect of the same securities but at widely different Delivery Rates. He reluctantly agrees that in such transactions his reasoning given above cannot apply. He is, then asked whether the rates in such types of transactions would be offered by the brokers. Again he starts prevaricating. He seeks to deny what is obvious. He denies that rates are offered by brokers. He is therefore, cross examined in detail on this aspect. He is also shown his earlier statement where he had said the rates are offered by the brokers. Ultimately after a lot of prevarication he has to finally agree that brokers do make offers regarding rates and securities. In this process of trying to deny that rates are offered by brokers, he also took up a contention that in transactions of State Bank of India, there would not be different rates in respect of two transactions of the same security entered into on the same day. He was immediately shown two Cost Memos of the State Bank of India, wherein in respect of same security, on the same day there were two widely different rates. He goes through his record and ultimately says he could not explain as to how this had happened. He is then asked to explain a Switch Transaction. He does so. He is asked to explain a Double Ready Forward Transaction. He does so. He admits that in respect of deals covered by Exs. 13 & 16, the broker was one Naresh Agarwal. On the basis of the documents, he is made to admit that the offers in respect of Exs. 13 and 16 came from this broker. He is made to admit that in respect of Exs.13 & 16 his Bank had no direct connection with Standard Chartered Bank. He still tries to make out that even though there was no direct contact, Standard Chartered Bank had confirmed the deals. He then has to retract this statement when it is pointed out to him that the only documents which would go to Standard Chartered Bank would be the Memos of the Broker and the SGL forms. He has to admit that from these documents Standard Chartered Bank would not know whether in the records of State Bank of India these were shown as out right sale and purchase or as Ready Forward or as Double Ready Forward or as Switch Transactions. Confronted with this position, the witness again prevaricates. He says that the said Bank however, delivered the securities. He then has to admit that the securities under Exs. 13 and 16 were received by State Bank of India through the broker Naresh K. Agarwal. He then had to admit that the information contained in Exs. 14, 15 and 17 i.e., in respect of Deal Slips Exs. 13 and 16 had been given to the State Bank of India by the broker N.K. Agarwal. He then had to admit that in respect of 11.5 Government of India 2010 and 2007 there was a fraud in the transactions of State Bank of India. He then had to admit that the person connected with that fraud was N.K. Agarwal. He then had to admit that as a result of this fraud, there was a shortfall of Rs. 230 crores in the State Bank of India. He still tries to deny that the transactions under Exs.13 and 16 are Switch Transactions. This because he realises that if they are Switch Transactions, then they would be outright Purchases and Sales . At this stage it must be kept in mind that according to this witness a Ready Forward Transaction is entered into for SLR requirements. It would also be a funding transaction. DW1 is questioned in detail about the alleged Double Ready Forward Transaction in Ex.13 i.e., the transaction of 27th November, 1991. He states that this was a Double Ready Forward Transaction under which long dated SLR securities of the face value of Rs. 200 crores had been sold and SLR securities of the face value of Rs. 212 crores had been purchased. He admits that between the two banks by way of net settlement the only transfer of money was a sum of Rs. 8.68 crores. He admits that in this transaction, there was no SLR implication. Thus one of the elements of Ready Forward Transaction disappears. He admits that in respect of this transaction both Banks has neither borrowed nor lent amounts to each other. Therefore, even the second element of funding disappears. He then admits that according to the records of his Bank on a footing that amounts had been lent at 11.5 per cent and borrowed at 9 per cent, his Bank had made a profit of Rs.1 crore. He also admits that normally in such transactions gross interest would never be charged. He is then shown Ex. 13. This shown that gross interest has been charged. He tries to justify this by saying that this was charged because his Bank would not have got interest on these securities during the shut period. He states that gross interest was charged to make up the loss of interest during the shut period. It is immediately pointed out to him that transactions do not take place during the shut period. He admits this position. It is then pointed out to him that during the shut period, the securities cannot be transfered because the books will be closed. He has to agree to that also. He also has to agree that in the books of the Reserve Bank of India, during this period, the name of his Bank would have continued to appear. He now realises that his statement why gross interest was charged is being completely destroyed. He starts prevaricating. He says that if an SGL is received, then Standard Chartered Bank had become the owner of the securities. It is immediately pointed out to him that in this case an SGL is not given. It is pointed out to him that a bankers receipt had been issued. He tries not to admit this. He is however forced to do so on the basis of the records. It is then put to him that his earlier statement as to why gross interest is charged is wrong. He still tries to deny this. Of course it a denial which he cannot sustain at all. He ultimately has to agree that in this case, there is no reason why gross interest should have been charged. He is ultimately forced to admit that his earlier reason why gross interest is charged is not correct. It is then put to him that the factor of gross interest has been included at the instance of the broker in order to achieve a price adjustment. His answer is most telling. He says 'I am not aware of the broker's intention'. Thus the fact that the gross interest was included at the instance of the broker is admitted. What other reason can a broker have for having an element of 'gross interest' included.
92. He is further cross examined on Ex. 13. It is shown to him that even though this is supposed to be a Double Ready Forward Transaction, one of the securities has been prematurely sold on 22nd January, 1992. He has to admit this. It is also pointed out to him that in place of that security some other security was substituted. He has to admit that also. As seen earlier in a Ready Forward Transaction, on the reversal date the same stock of the same value must go back. In a Ready Forward Transaction, there is no question of substitution of a security or stock with a different security or stock. It is thus clear that even though in the record of the State Bank of India the transactions in Ex. 13 are shown as Double Ready Forward Transaction, they were in fact not Ready Forward Transactions at all. It was clear that the records of the State Bank of India had been structured. It was clear that DW1 knew this from the start and therefore the prevarication at various stages. However the most telling circumstance is the answer of this witness to a question as to whether he would have entered into a transaction of the nature set out in Ex. 13, i.e., a transaction which had no SLR implications, in which there was no funding and yet the said Bank had to pay Rs. 1 crore. His answer was categoric. He stated that the State Bank of India would never have entered into such a transaction. Is it to be believed that the State Bank of India would not have entered into such a transaction, but the Standard Chartered Bank did.
93. DW1 was then cross examined on the second transaction, i.e., Ex. 16. To be remembered that he had claimed that this was also a Double Ready Forward Transaction. He, admits that as per his records State Bank of India was to sell securities of Rs. 500 crores and purchase securities of Rs. 550 crores. He admits that between two Banks, the only transfer of fund is a sum of Rs. 7.89 crores. He admits that there is no other lending or borrowing between these two Banks, He admits that even in respect of these transactions, there is no SLR implications. Thus even in respect of these transactions, it is established that none of the elements necessary for a Ready Forward Transactions were existing. Yet his Bank has received a profit of Rs. 2.4 crores in the transaction. He is also asked whether his Bank would have entered into such a transaction. He answers that the State Bank of India would never have entered into such a transaction. That is not all. It is now pointed out to him that in respect of transactions under these Deal Slips, the State Bank of India had in fact paid (by way of Pay Order) a sum of Rs. 327 crores to Standard Chartered Bank. A payment would only be made if there was out right purchase or sale. If this was a Double Ready Forward Transaction, then there would be no question of actually paying such a large sum. He is then asked him whether he was still maintaining that this was a Double Ready Forward Transaction. He has no answer . After thinking for some time he claims that for the balance it was a Double Ready Forward Transaction. Thus to the extent of Rs. 370 crores he is forced to admit that the transactions were never a Double Ready Forward Transaction. If out of the transaction of Rs. 500 crores, transactions of Rs. 327 crores were admittedly never Double Ready Forward how can it be believed that the balance were Double Ready Forward Transaction? Also if this were so why start by claiming that the entire transaction was a Double Ready Forward Transaction. That these were not Double Ready Forward is clear from Ex. 18 (Colly.). These are letters sent by the Manager of the Security Division to DW1. These are in respect of the transactions of 13th and 14th December, 1991. These letters pertain to Deal Slip Nos. 7550, 7551, 7552, 7553, 7630, 7631, 7632 and 7633. If on these dates, i.e., 13th and 14th December, 1991 the transactions were entered into as Ready Forward, these letters from Security Division would have shown that the delivery was with a commitment to re-buy. These letters show that securities covered under these transactions have been delivered. This also shows that the transactions were mere sale transactions.
94. What follows is most telling. In a Double Ready Forward Transaction on the purchase and sale legs there must be an identical number of securities which are transferred. The witness is asked to count and point out from Ex. 13 how many securities were transferred on the purchase leg and how many on the sale leg. The witness counted thrice in Court. He thereafter gave a figure 44 securities on the purchase leg and 47 on the sale leg. Similarly, he was asked to count in respect of Ex. 16. After counting, he admits that even in this case the numbers did not tally. There were 85 transactions on the purchase leg and 87 transactions on the sale leg. He could not explain how, if this was a Double Ready Forward Transaction, this difference appeared. This clearly shows that the transactions were not in reality Double Ready Forward Transactions. It shows the records of State Bank of India were structured such as to make it out that these were Double Ready Forward Transactions. The reason can only be one. The broker concerned with the transactions of State Bank of India must have had to make good to the State Bank of India sums of Rs. 1 crore and Rs. 2.40 crores. This is how the broker has made good these amounts to the State Bank of India . The fact that the records of the State Bank of India have been structured is clear from further material which is before the Court. The witness is asked to look up his record and state whether on 11th January, 1992 the said Bank has entered into transactions of purchase and sale of 12 per cent MSEB Bonds with the State Bank of India. After looking at the records, he admits that the transaction had taken place. Looking at the records, he claims that these also are Ready Forward Transactions. Looking at the records he says that as per this transaction, a sum of Rs. 5,000/- was payable by the Standard Chartered Bank to the State Bank of India. DW1 is asked whether this amount has been received by State Bank of India. He claims that this amount has been paid by the Standard Chartered Bank. He immediately realises that he might get into difficulty with this answer. He, therefore, immediately clarifies that he is saying so only on a presumption. He is then asked whether he is personally aware that such a transaction has in fact taken place. To be remembered that he is the Deputy General Manager in charge of this Department. So far he has given evidence on his personal knowledge . Having realised what is likely to happen, he says that he is not personally aware as to whether such a transaction has in fact taken place or not. He states that he cannot deny that such a transaction has never taken place. That such a transaction has never taken place is clear from what follows. DW1 is called upon to produce the records to show how this sum of Rs. 5,000/- was received by the State Bank of India. Very cleverly the witness does not bring to Court the records to show how this sum of Rs. 5,000/- was received. He only brings to Court a cheque drawn by the State Bank of India and payable to Standard Chartered Bank. It is put to him that the amount was to be received by the State Bank of India and therefore, there was no question of cheque being drawn by State Bank of India payable to Standard Chartered Bank. He prevaricates and ultimately admits that this cheque has never been sent to the Standard Chartered. It is finally ascertained that this cheque is internally transferred to an account termed as Bank's Investment Account-Other Trustees Security'. However the State Bank of India must have received a cheque for Rs. 5,000/-. The witness never produced that cheque. From the fact that DW1 was not producing in Court that cheque the Court will have to draw an inference that the amount of Rs. 5,000/- has been paid by the broker. It is clear to Court that such a transaction never took place and that this record was created. This could only be for purpose of adjusting the liability of the broker. There is one other transaction which needs mentioning. On 14th December, 1991 apart from the transactions set out in Ex. 18, there was one more transaction of sale. DW1 is asked whether that transaction of sale was in respect of 7.5 per cent IFCI 1996 Bonds (2nd Series) . He admits that is so. He is asked whether in State Bank records this is shown as a sale. Trying to seize an opportunity DW1 states that this is a Ready Forward Transaction. He is asked whether he is sure and whether on the same day same Bonds of the same value have not been purchased from the Standard Chartered Bank. He denies such a transaction. He is immediately shown a document of State Bank of India wherein on the same day, the same bonds of the same value is shown to have been purchased from the Standard Chartered Bank. He is asked to explain as to how on the same day, same security of the same value and at the same rate could have been purchased and sold as part of Ready Forward Transaction. He has no answer. He has to say that he could not explain . What is more important is that this is a transaction which is supposed to have taken place on 14th December, 1991. In respect of transaction of 14th December, 1991, the Note Ex. 17 has been prepared. In that note, there is no reference to such a transaction.
95. This is the evidence of DW1 Deputy General Manager of the State Bank of India. This evidence had been lead to prove that transaction of 27th November, 1991, i.e., under Deal Slip No. 7322 (part of Ex. O) and transactions of 13th and 14th December, 1991, under Deal Slip Nos. 7550, 7551, 7552 , 7553, 7630, 7631, 7632 and 7633 (all part of Ex. O) were Double Ready Forward Transactions. In my view, this evidence has established the contrary. At the cost of repetition it must be emphasised that Ready Forward Transaction is entered into only because of SLR requirements or as a funding transaction. It is also an admitted position that there was no restriction by the Reserve Bank of India on Commercial Banks from entering into Ready Forward Transactions in SLR securities. Then there is thus no necessity for any Bank to camouflage a Ready Forward Transaction. However purchase and sale transactions may be camouflaged as a Ready Forward Transaction in order to artificially make out differences in prices. DW1 starts by saying that these transactions were all Double Ready Forward Transactions. He ends up by admitting that there were no SLR implications, that there was no funding between the Banks, i.e., neither Bank has lent nor borrowed any amounts. Yet the State Bank of India has made profit of Rs. 1 crore and Rs. 2.4 crores respectively. DW1 ends up by admitting that there were premature reversal, substitution of stock and also payment of Rs. 327 crores. He ends up by admitting that to the extent of Rs. 327 crores the transactions were never Double Ready Forward. He ends up by ending that the number of transactions on the purchase leg and the sale leg do not tally. He ends up by admitting that State Bank of India would never have entered into such transactions. All this clearly establishes that the transactions were not Ready Forward. Mr. Ovalekar had submitted that there was no cash flow because a process of netting had taken place. However this is not stated by any witness. Also interest has been ostensibly charged by State to the said Bank on amounts ostensibly advanced. This is not on the footing of any netting, but on the footing that the entire amount was advanced. Realising this difficulty it was sought to be submitted that the said Bank had received securities and must have deployed the securities before they were returned and earned money in that fashion. This again without any evidence to support it. Nobody has so stated. Also in cases of Double Ready Forward, even State Bank of India would received some securities.They would also be redeploying the securities. This does not answer the question as to why the said Bank would pay interest on amounts which were admittedly not lent. Mr. Ovalekar submitted that merely because there was substitution of stock did not mean that the transaction was not Ready forward. He submitted that since a Ready Forward transaction is basically a borrowing or lending transaction, the replacement of the nature of the stock does not in any way affect the character of the Ready Forward transaction. He submitted that the substitution would be with a SLR stock and as far as possible of the same value. He submitted that even if there is difference it would not matter as the interest was payable on the value of the stock. This argument is directly contrary to the evidence. All the witnesses who have been asked have stated that in a Ready Forward transaction the same stock of the same value has to be returned. If a different stock is returned the SLR requirements would get affected. An argument contrary to evidence cannot be accepted. Mr. Ovalekar also submitted that merely because Rs. 327 crores had been returned in cash did not mean that the transactions were not Ready forward. He submitted that instead of returning securities, an amount could be returned. This is not acceptable. As stated above, in Ready Forward the same stock of the same value must be returned. If money is returned then the SLR requirement would be definitely affected. Most importantly DW1 has admitted that to the extent of Rs. 327 the transaction was not Ready Forward. In view of this admission how can a contrary argument be advanced or accepted.
96. In cross examination of PW3 it had also been suggested to him (on pages 53, 54, 55, 56, 64 and 65 of the Notes of Evidence) that certain transactions under Deal Slips mentioned on those pages are Ready Forward Transactions. Except for this suggestion, which has been denied by PW3, no evidence has been brought on record to prove that these were Ready Forward Transactions. The Deal Slips, on the face of them, show that these are not Ready Forward Transactions. The Court has seen that the accused is well aware of how the transactions are shown in the records of the counter party Banks. Where the records of the counter party Bank appeared to support him, the accused has led evidence of witnesses from that Bank. The fact that in respect of these transactions no evidence is led by the accused clearly shows that he was not in a position to show that those were Ready Forward Transactions. This shows that even in the records of the counter party Banks these transactions are not shown as Ready Forward. In my view, it will have to be held that the accused has failed to show that these transactions between the Standard Chartered Bank and the State Bank of India were Ready Forward Transactions or Double Ready Forward Transactions. In my view, the evidence of DW1 clearly establishes that these were out right purchase and sale transactions.
97. On behalf of the accused, the evidence has also been lead of one Sriker Rao Ananthayya Rao Khmbadkone (DW 2). He is a Manager in ANZ Grindlays Bank. This evidence has been lead for the purposes of showing that the transaction of 11th November ,1991 under Deal Slip No. 7163 (part of Ex. O) is non-existent. This witness has deposed that there was no such transaction between the Standard Chartered Bank and ANZ Grindlays Bank. This witness has also been examined for the purposes of explaining when and how figures are shown in four decimal points. His deposition is that in cases of Ready Forward Transactions, there was a possibility of four decimal points being used. He has explained in detail how that happens. In cross examination of this witness, number of Deal Slips of ANZ Grindlays Bank have been brought on record as Exs. Z7 to Z35. This has been brought on record for the purposes of showing that even the records for the purposes of showing that even the records of Grindlays Bank are structured and much reliance cannot be placed on them.
98. Thus the accused started by claiming that 17 transactions were Ready Forward Transactions. Out of this, we have seen already seen that 11 transactions with State Bank of India were not Ready Forward Transactions. The other Transaction which are claimed to be Ready Forward are those with Citi Bank, Bank of America and Hongkong Bank. In respect of those transactions, the accused has chosen not to lead any evidence at all. All that has been done is that in cross examination of PW3 it is suggested to him that these are Ready Forward. This has been denied by PW3. As stated above it is most pertinent that in respect of those transactions, records of Hongkong Bank, Citi Bank and Bank of America have not been produced in this Court. It will have to be presumed that this has not been done because had they been produced in Court, they would have completely demolished the theory that these transactions were Ready Forward Transactions. In respect of other transactions, all that has been sought to be done is to place before the Court certain other Deal Slips of the said Bank and make a suggestion that those Deal Slips in are the other leg of Ready Forward Transactions as disclosed in those Deal Slips Ex. O, P and Q. This only on the basis that two Deal are in respect of the same stock of the same value. In my view , this means nothing. There could be number of explanations for that, e.g., they could be a series of transactions. The accused could have produced the records of the counter party Bank, as done in the case of State Bank of India and ANZ Grindlays Bank. The fact that the accused has chosen not to do so suggests that these are not Ready Forward Transactions. Also all the Deal Slips on their face do not show that these are Ready Forward Transactions. The burden of proving that these are Ready Forward Transactions was on the accused. Even on basis of preponderance of probability the accused has failed to discharge the burden. On the contrary, in my view the case of the prosecution gains support from the deposition of DW1 and the material now on record.
99. That these are Ready Forward Transactions is also sought to be proved on the basis that the Contract Rates mentioned in these Deal Slips do not tally with the Reserve Bank of India rates. The Reserve Bank of India rates are mentioned in Ex. 26. However Ex. 26 applies only to transactions in switches and only to Government securities . Also there is no evidence on record to show that the circular Ex. 26 is binding on the various Banks. It is not stated by anybody that transactions cannot be at rates other than the rates in Ex. 26. In fact Mr. Ganeshchandra Krishnachandra Talukdar DW4, a staff officer in the Reserve Bank of India who produced this list did not even state that this was supplied to all the Banks. He did not state that all the Banks were supposed to follow this circular. Also accused has relied upon the evidence of DW2. In the Deal Slips of ANZ Grindlays Bank (which have come on record) the rates do not tally with the rates indicated in the Ex. 26. Also a number of Deal Slips have been tendered on behalf of the accused. In most of those the rates do not tally with Ex. 26. This shows that the circular Ex. 26 was not binding and the other Banks did not buy or sell only at the rates mentioned therein.
100. The next basis on which it was sought to be contended that these transactions were Ready Forward Transactions was on the basis of four decimal points. There can be no denying that the mere fact of calculations being in four decimal points, does not by itself establish that the transaction is a Ready Forward Transaction. This particularly so when the Deal Slip on the face of it shows that the transaction was an outright purchase or sale. It must also be noticed that out of 17 transactions claimed by the accused to be Ready Forward Transactions, only 12 of them have four decimal points. Out of these 12, 9 have been shown to be not Ready Forward Transactions. As stated above in respect of the others, the accused has chosen not to produce the documents of the counter party Banks. As stated above this shows that had they been produced, it would have established that these were not Ready Forward Transactions. Most significantly PW3 was not asked to explain how and why four decimal points appeared on these Deal Slips.
101. Before parting with this, it must be mentioned that to Court it appears that even otherwise this would not be a defence. A transaction may be a Ready Forward Transaction. However if on the first leg there was a difference in the Contract Rate and the Delivery Rate, then on the second leg the transaction would be completed only at the Delivery Rate. Of course the Bank would have got back the security, but the difference in the Contract Rate and Delivery Rate would still remain. If the delivery had been at contract rate then the second leg would also be at that rate. However if delivery is at a rate different from the contract rate, then the second leg is also at the delivery rate. In either case the security is returned. Still the loss arising from the difference in contract rate and delivery rate remains. In fact in such cases there would also be an element of loss of interest on the difference in the Contract Rate and the Delivery Rate. Thus if at all in a Ready Forward Transaction the liability would be larger.
102. It was next submitted by Mr. Ovalekar that even according to prosecution, there was a fraud. He submitted that this is an attempt to recover a claim arising out of a fraud. He submitted that such an action is barred under section 23 of the Contract Act. He submitted that for that reason also no prosecution can lie in respect of any illegal transaction. In my view, this submission is not correct. This is not a suit or a claim for recovery of loss or damages. This is a prosecution under section 138 of the Negotiable Instruments Act. In this prosecution, the Court is only concerned with seeing whether or not the offence is committed. This is not by way of a recovery proceedings. So long as the conditions of section 138 are fulfilled a prosecution will always lie. Even otherwise even presuming that this was a claim for recovery, in my view, it would not be hit by section 23. The claim would still be for recovery of an amount or loss caused by reason of fraud played on the claimant. It is not as if claimant. had entered into a transaction to commit a fraud.
103. The next submission of Mr. Ovalekar is that the accused had given to the said Bank a number of cheques in all totaling to an amount of Rs. 87,93,77,332.22. He refers to the Written Statement wherein this has been set out in detail. Mr. Ovalekar was very particular and clarified that it was not the case of the accused that these cheques had been given towards payment of any liability. He stated that this submission was also in respect of the cheque of Rs. 15 crores which was admittedly received by the said Bank. He submitted that the said Bank in the process of restructuring used to call upon the accused to give cheques. He submitted that as and when the accused was called upon to do so, he gave cheques. He submitted that so far as transactions under Ex. O are concerned, the alleged total liability was Rs. 60,77,40,250/-. He submitted that the said Bank had admittedly received a cheque for Rs. 15 crores. He submitted that the deal with Grindlays Bank for Rs. 1.66 crores had never taken place. Mr. Ovalekar also submitted that out of these transaction of 13th and 14th December , 1991 were Ready Forward Transactions. He submitted that the amounts of those transactions must also be deducted. He submitted that the remainder of the alleged liability would only be to the extent of approximately Rs. 10 crores. He submitted that even if these Ready Forward Transactions up to 18th December, 1981 were not excluded, still the alleged liability, would be only in a sum of Rs. 44,11,40,250/-. He submitted that as against this, Exs. 22 and 23 showed that the accused had given cheques totaling Rs. 36,17,59,928/-. He submitted that, therefore, the alleged liability of the accused, if any, was not more than Rs. 7,93,90,338/-. He submitted that Exs. B and C together amounted to Rs. 41.5 crores. He submitted that when upto 26th December, 1991, the liability was only Rs. 7 crores and odd it was most improbable that the accused would have given cheques of Rs. 41.5 crores.
104. He further he submitted that under Ex. P the alleged liability was Rs. 39,50,50,000/- . He submitted that Exs. 22 and 23 showed that cheques in a sum of Rs. 45,14,79,336.22 were handed over to Standard Chartered Bank upto that date. He submitted that even during this period four of the transactions totaling Rs. 8.34 crores were Ready Forward Transactions. He submitted that, therefore, at the highest the alleged liability if any was only in a sum of Rs. 31 crores. He submits that as against Rs.45 crores had already been paid to the said Bank. He submitted that the cheque Ex.D was for Rs. 17crores. He submitted that it was most unlikely and improbable that this cheque could have been given towards any liability when in fact no liability existed.
105. Mr. Ovalekar submitted that the total of Ex.Q was a sum of Rs.30,97,34,135/-. He submits that in this Exhibit the last claim is for a period after the cheque had been given. He submitted that the alleged liability under Ex.Q was Rs. 15,89,84,135/-. He submitted that in this there were Ready Forward Transactions to the extent of Rs.15,17,84,135/-. He submited that therefore, there was hardly any liability. He submitted that it is most inprobable, unlikely and unbelievable that the cheque Ex. E in a sum of Rs.19,95,75,000/- could have been given towards these alleged liabilities. He submitted that these clearly established that there were no liabilities under Exs.O, P& Q.
106. In my view, for more reason than one, this argument cannot be accepted. To start with as Mr. Ovalekar was at pains to point out to Court, that it is nobody's case that cheques under Exs. 22 and 23 were given towards this liability or towards any liability. If the cheques were towards any liability, then it would clearly establish that the accused was giving cheques to meet such liabilities. It is because of this that Mr. Ovalekar has been at pains to emphasise that the accused is not claiming that the cheques in Exs.22 and 23 were given for meeting liabilities .The case of the accused is that these cheques were given to enable the said Bank restructure its affairs. However nobody would give such large amounts for nothing. If such large payments are not made towards liabilities, they could only be given in expectation of getting some return. It is for this reason that in the Written Statement it is stated that the said Bank had promised to suitably compensate the accused. The cheques under Exs.22 and 23 are given over quite a long period of time. Thus if, as claimed the cheques were given for restructuring and the said Bank did not suitably compensate the accused he would never have continued to give the cheques. The accused has not even claimed that he has been suitably compensated. There is nothing on records to show that he has been so compensated. The fact remains that cheques in a sum of Rs.87 crores (not including Rs.15 crores) have been given. The cheques have been encashed and adjusted. If these were mere loans as now sought to be suggested, at some stage or the other the accused would have asked for return or adjustment of the amounts of cheques under Exs.22 and 23. This has never been done. This has not been done even after the said Bank started demanding amounts from the accused. All that has been done is to make in the correspondence general statements that nothing is due from the accused and that amounts are due and payable to him. That the cheques Exs. B, C, D and E were given is not disputed. As set out hereafter it is claimed that they were given for intended deals. If, as now claimed, these amounts were available with the said Bank then the question of paying further amounts towards intended deals would also not arise. The fact that these cheques were given shows that the accused was aware that all the amounts paid by him stood adjusted. It shows that the accused knew when he gave cheques Exs. B, C, D and E that he did not have any amounts standing to his credit with the said Bank. Thus e.g. if as now claimed, a sum of Rs. 36,17,59,928/- was lying to the credit of the accused, there was no necessity for the accused to give the cheques Exs. B and C towards any intended purchases also. PW.3 has deposed that apart from the liability for difference in Contract Rate and Delivery Rate, the said Bank is claiming that the accused is also liable for a fraud in not delivering stocks and securities purchased and paid for by the said Bank. That liability is claimed to be Rs.1240 crores. PW3 has deposed that all cheques which have been received from the accused have been credited. Very significantly he was never asked as to how these cheques under Exs.22 and 23 have been utilised and towards which liability to be remembered that in this case the burden of showing that there is no liability is on the accused. The fact that PW3has not been asked to explain shows that the the accused knew very well that had he been so asked, PW3 would have shown that the said Bank had adjusted all the cheques under Exs.22 and 23 against other liabilities. It is impossible to believe that the accused did not know how cheques for such a large amount were adjusted. In law, unless a debtor specifies that a payment is towards a particular liability, the creditor can always utilise the payment towards meeting any liability. If it was the case of the accused that the amounts of the cheques under Exs. 22 and 23 were to be utilised for meeting this liability, then the accused should have adduced some proof for it. His mere word is not enough. He has to adduce evidence/proof to show that they were to and were so utilised. The accused could have done this through PW.3 or by independent evidence. The accused has refrained from asking PW3 as to how these cheques wer e utilised. In this case, the evidence of PW3 was restricted to evidence pertaining to transactions where there was a difference in contract rate and delivery rate. PW3 has not giving evidence in respect of the fraud of Rs. 1240 crores. However the letter dated 11th May, 1992 (Ex.M)is on record. In this letter the accused admits his liability to the said Bank in respect of the said fraud under the first head. Of course it cannot be said that this proves that there is a liability under the first head.But this establishes that the accused has so stated in the said letter. Of course in his examination under section 313 and in the correspondence, the accused claims that this letter has been obtained by fraud or under coercion. However at this stage and in these proceedings the Court is not concerned with the case of fraud. This is only mentioned to show that according to the said Bank this was not the only liability of the accused. Of course in this prosecution they have restricted their case to the liability by reason of differences in Contract Rate and Delivery Rate. As stated above it is not even in the case of the accused that the cheques under Exs. 22 and 23 were given for meeting these liabilities or any liabilities. It is the case of the accused that they were given for intended purchases. His story, which is only found in the Written Statement, that they were given to enable the said Bank to restructure is unbelievable. Apart from the bare word, there is no proof of it. These payments could therefore be only towards liabilities. In my view, the fact that so many cheques were given shows that the accused was making payments to the said Bank towards his liabilities. The fact that some of the cheques tally exactly with the amounts arising as a result of difference in contract rate and delivery rate shows that the accused was accepting liability towards such differences . On record there is no protest that cheques for exact amount of differences were utilised by Bank to meet other liabilities. It is not even the case of the accused that liabilities under Exs.O, P,or Q or part thereof have been paid off by the cheques Exs. 22 and 23. In fact Mr. Ovalekar has been at pains to emphasise that such is not the case of the accused and the evidence of PW3 that all payments made by the accused have been accounted for is not challenged. The calculations made by Mr. Ovalekar (as set out above) would have any basis only if the cheques in Exs. 22 and 23 were given for meeting liabilities. The evidence of PW3, shows that all the payments including under Exs. 22 and 23 have been accounted for.. Therefore, if one discounts these amounts the liabilities under Exs.O, P & Q remain. Under these circumstances, I see no substance in these submissions also.
107. Mr. Ovalekar submitted that the cheques were given for the intended deals as set out in the Written Statement. As set out earlier, in the Written Statement it is claimed that on 23rd December, 1991 the accused informed the said Bank that he wanted to purchase further Units. It is averred that in anticipation of the purchase, on 23rd December,1991 the cheques Exs.B and C for Rs. 27 crores and Rs.14.50 crores respectively were sent. It is claimed that these were for purchase of 2 crores and 1.08 crores Units on the respective dates at the rates of Rs. 13.50 per Unit and Rs. 13.40 per Unit . It is claimed that on 24th December, 1991 Canfina wanted to buy 2 crores of Units and as the said Bank was holding a Bankers Receipt for 2 crores Units of Canfina, the said Bank preferred to square off the same with Canfina and hence the transaction was note done with the accused. It is claimed that the accused agreed to the sale being done directly to Canfina. It is claimed that on 26th December, 1991, Citi Bank offered to purchase 3crore Units at a rate offered by the accused. It is claimed that as the quantity was more and as the said Bank wanted to sell more Units, he agreed to give up the transaction. It is claimed that the intended transaction for sale of 1.08 crores Units with him did not materialise for this reason. It is claimed that on 17th February, 1992, the accused had with him 80 lakhs Units. It is claimed that on that day Canfina wanted to purchase 2 crores Units. It is claimed that initially the accused decided to purchase the balance Units from the said Bank and sell the total quantity to Canfina. It is claimed that it was for the intended purchase of 1,22,50,000 Units that the cheque Ex.C was given. It is claimed that when he approached the said Bank , he was informed that they were holding a Bankers Receipt of canfina for 2 crores Units. It is claimed that the said Bank preferred to return back this Bankers receipt and hence the transaction was done directly with Canfina . He admits that he was a broker of Canfina in this transaction and that this transaction was done on 18th February ,1992. He states that 80 lakh Units which were held by him were sold to the said Bank on 18th February, 1992, as the said Bank had agreed to buy these from him. It is claimed that on 27th March, 1992, the accused wanted to purchase Rs.7 crores Units of Can Star and and Rs.10 crores Units of Can Premium. It is averred that the said Bank had purchased these Units from Grindlays Bank. It is claimed that the accused had issued his cheque for Rs. 19,95,75,000/- for this intended purchase. It is claimed that in the meantime the accused received a request from the Citi Bank for purchase of these Units. It is claimed that the accused, therefore, requested the said Bank to do the deal directly with the Citi Bank and the same was done on 28th March, 1992. It is claimed that in these circumstances, none of the intended transactions in respect of the aforesaid cheques had taken place and that the cheques were not to be encashed and were required to be returned. It is claimed that the cheques were delivered by his staff to some one in the Bank. It is claimed that, under the circumstances, the cheques Exs. B, C, D & E were not for discharge of any debt or liability.
108. Thus according to the accused, the cheques Exs. B and C were delivered on 23rd December, 1991. This ostensibly was for intended purchases of 2 crores and 1.08 crores Units. According to him the cheque Ex.D was given on 17th February, 1992. This ostensibly for intended purchase of 1,22,50,000 Units. The cheque Ex.E was allegedly given on 27th March, 1992 for intended purchase of 7crores Units of Can Star and 10 crores Units of Can Premium. Apart from what is stated in the Written Statement there is no evidence or proof in support of this case. To be remembered that the burden has to be discharged by proof. The bare word of the accused is not sufficient . Also as stated above this story of giving cheques towards intended purchases runs contrary to case that on the dates Exs. B, C, D & E were given large amounts were lying to the credit of the accused. If large amounts are lying to his credit of the accused. If large amounts were lying to his credit then there would be no question at all of paying in advance and that to for intended transactions.That the case is false is also clear otherwise. This is clear from fact that at the very first opportunity this was not the stand taken by the accused. By his letter dated 8th June, 1992 the accused replied to the demand made for payment of the cheques Exs. B, C, D & E. In the letter he states as follows:
'As you are aware in order to facilitate the account keeping and the various allied requirements of your Bank, the transactions of your Bank through me are many a time restructured for the said purpose. As you are well aware the aforesaid cheques were given to you pending various such restructuring/adjustments.'
109. Thus at the very first opportunity it was claimed that these cheques were given towards restructuring. This shows that the story subsequently put forth is an after thought. Also this story has to be tested in the light of evidence on record. As has been seen from the evidence, in this trade, there is absolutely no practice of giving cheques in advance. This is admitted even by the witnesses led by the defence. Also it is established on evidence that in respect of transactions, which have been entered into , Deal Slips are always prepared. This even though the transaction may subsequently be cancelled. In respect of these alleged transactions, there are in fact no Deal slips. At the beginning of the trial itself, the Court had directed the said Bank to give, to the accused, copies of all the Deal Slips for the relevant period. This had been done. As stated above, all the Deal Slips bear serial numbers and are ultimately bound and preserved. The accused has with him copies of all the Deal Slips. If there were any Deal Slips in respect of the alleged transactions, he would have produced the same. If copies of some Deal Slips had not been given to him by reason of missing numbers, he would have known. He would then have complained to this Court and/or called for those Deal Slips. Very fairly it has not been denied that copies of all Deal Slips were given to the accused. The fact that the accused could not produce any Deal Slip in respect of any intended transactions shows that there were no such transactions. Even othetwise, as stated hereinabove, according to the accused, the cheques Exs. B and C were given on 23rd December, 1992. However, the statement of account of the accused with Andhra Bank i.e. Ex. Z-36 shows that a cheque bearing No. 985205 was encashed on 23rd Decenber, 1991. Therefore, this cheque must have issued earlier to 23rd December, 1991. If that be so, then cheques Exs. B and C which bear Nos. 985203 and 985204, must have been given to Standard Chartered Bank before 23rd December, 1991. The story that these were, therefore given on the 23rd thus gets falsified. Also it is unbelievable that cheques for such large amounts would be given for intended purchases in future. Also it is in my view unbelievable that on 23rd December, 1991., the accused could not have contemplated or known that on 24th and 26th he would want to buy the Units as now alleged by him. Further, Ex. z36 shows that on 23rd December, 1991, the accused in fact returned a sum of Rs. 18.09 crores which he had earlier received from Standard Chartered Bank. His case in para 25 (a) of the Written Statement is also belied. The alleged story about Ex. D is also belied by material on record. To be remembered that according to the accused this cheque was given on 17th February, 1992. His case in para 25 (e) is that on 17th February, 1992 Canfina wanted to purchase 2 crores Units. The case in the Written Statement is that on that day the accused was holding only 80 lakh Units and therefore,was considering buying the balance 1,20,00,000 Units from the said Bank. It was for this intended purchase that the cheque Ex. D was allegedly given. Therefore, prior to 17th February the accused could not have intended to purchase the 1,20,00,000 Units. Ex. Z-36 shows that a cheque bearing No. 989898 has been cleared on 13th February, 1992. It must therefore, have been issued earlier. The cheque Ex. D bears 989897. It must have been drawn prior to 13th February, 1992. It is not even the case of the accused that on 13th February or before this date, he had contemplated that on 17th February, 1992, he would be wanting to enter into this intended transaction with the said Bank. All these alleged intended transactions did not take place because of the said Bank preferring to deal directly with the other Bank. However before this direct transaction took place the accused must have had talks/negotiations with dealers/officers in the said Bank as well as the other Bank. One can understand that the accused could not lead evidence of the dealers/officers of the said Bank. However evidence of dealers/officers of the other Banks to show that he has first transacted with them and had then passed on the deals to the said Bank could have been led. significantly no such evidence has been led. Also if the intended transactions never materialised then the accused would have demanded return of the cheques. This also shows that the story of the cheques having been given for the intended purchase is false and cannot be accepted . For all these reasons the case of the accused that the cheques Exs. B, C, D and E were given for intended deals cannot be accepted.
110. Mr. Ovalekar also submitted that the cheques Exs. B and C were not presented for 5 months and cheque Ex. D was not presented for 3 months. He submitted that this clearly showed that the cheques were not given towards any liability but for some other purpose. He submitted that this shows that the cheques were never to be encashed and that the said Bank is now falsely making a claim on these cheques. He submits that this is supported by fact that in the correspondence and in the complaint there is no mention of any liability towards differences in Contract Rates and Delivery Rates. I am unable to accept this submission. As has been seen in greater detail hereinabove, there was a liability of the accused towards the differences in the Contract Rate and the Delivery Rate. As is seen hereinabove, the story that these cheques were not given towards discharge of any liability cannot be accepted. Also the Court cannot ignore the fact that a major fraud has taken place in the Banking System. This, prima facie, could only be in connivance with the officers of the Bank. Under these circumstances, nothing much can be made out of the fact that the officer then in charge, did not present the cheques for payment and kept them with him.
111. It is also submitted by Mr. Ovalekar that on 8th January, 1992, that accused was notified under the Special Courts Act. He submitted that the period of 15 days would have expired on 15th June ,1992. He submitted that as a result of the accused being notified, it becomes impossible for the accused to make payment of these cheques. He submitted that had the accused not been notified, it is possible and probable that the accused may have made arrangement for payment of these cheques. He submits that the notification operated as a bar aginst the accused making payment under the said cheques and that there was, an impossibility of performance. He submitted that under section 138 before any offence can be said to have been committed, there must be a willful failure to make payment of the cheques. He submitted that if by reason of operation of law a person is prevented from making payment, he cannot be said to have committed a willful default. He submitted that under these circumstances it cannot be said that the accused has committed an offence under section 138. At first blush this argument would appear to be very attractive. However, on closer examination it will be seen that the Notification under the Special Courts Act did not have absolved the accused of his obligation to make payment. This because unlike as in a case of insolvency, under the Special Courts Act, neither on the coming into force of the ordinance or the Act nor on the person being notified, do contract and obligation under various agreements come to an end. This is very clear from section 4 of the act which empowers the custodian to cancel any contract or agreement entered into between 1st April, 1991 and the promulgation of the ordinance provided the same is entered into fraudently or to defeat the provisions of the ordiance. Thus contracts which have not been entered into fraudently or to defeat the provisions of the ordiance, can still be performed. All such contracts can be performed unless and until they are set aside by the custodian on the grounds mentioned under section 4. Infact this Court has had before it a number of applications by a number of parties asking for permission to fulfill their obligations under contracts. In some cases the Court has granted them. There was nothing which prevented the accused from applying to this Court for permission to fulfill his obligations or to pay of his debts under the cheques Exs. B, C, D & E. In this behalf it must be noted that this Court started functioning from 10th June, 1992. In fact from the very next day i.e. 11th June, 1992, applications were made before this Court. These are matters of record of this Court. Thus even after 10th June, 1992 upto 15th June, 1992, the accused had opportunities to apply to this Court for permission to pay the amounts of cheques. It may also be mentioned that during first few days, the applications were being disposed off immediately because there was no back-log. The application, if any had been made, would have been considered immediately by the Court . Apart from this, in my view, before a plea of impossibility of performance is accepted, it must be shown that there was readiness and willingness to perform. In my view, it must be shown that a person was ready and willing, but was unable to perform. In this case, the correspondence clearly shows that there was a denial of liability. There was in fact no readiness and willingness to pay. Also the accounts of the accused which have been brought on record, i.e., Ex. A and Ex. V ( for the period May and June 1992) show that in the account on which these cheques have been drawn, there was no balance to pay the amounts of these cheques. The witness PW4 from Andhra Bank has in fact deposed that the cheques were dishonoured for reason 'insufficient funds'. Apart from all this, in my view, the Judgment of the Division Bench in A.V.S. Perumal's case (supra) is a complete answer to the arguments of Mr. Ovalekar. The Division Bench has laid down that the reasons dishonor of a cheque, even though may be technical, are of no consequence. The Division Bench has laid down that the Magistrate, and in this case, this Court, must ignore the reason of dishonor. This Judgment is binding on this Court. Under the circumstances, this argument cannot be accepted and stands rejected.
112. In summing up Mr. Ovalekar submitted that all the above mentioned facts and circumstances establish that the accused has not committed any offence under section 138 of the Negotiable Instrument Act . Relying upon the case of Gian Mahtani v. State of Maharashtras, reported in : 1971CriLJ1417 , he submitted that a conviction cant be on suspicion nor on conscience of Court being morally satisfied about complexity of accused. He submitted that an accused can be convicted and sentenced only provided prosecution proves its case beyond a reasonable doubt.
113. To the proposition of law there can be no dispute. The Supreme Court has, in the case of Inder Singh v .The State (Delhi Adm.), reported i, laid down as follows:
'Credibility of testimony, oral and circumstantial, depends considerably on judicial evaluation of the totality, not isolated scrutiny. While it is necessary that proof beyond reasonable doubt should be adduced in all criminal case, it is not necessary that it should be perfect. If a case is proved too perfectly it is argued that it is artificial; if a case has some flaws, inevitable because human beings are prone to error, it is argued that it is too imperfect. One wonders whether in the meticulous hypersensitivity to eliminate a rare innocent from being punised, many guilty men must be allowed to escape. Proof beyond reasonable doubt is a guideline, not a fetish and a guilty man cannot get away with it because truth suffers some infirmity when projected through human process.'
In the case if Himachal Pradesh Administration v. Om Prakash, reported in (1972) S.C.J. 691 the Supreme Court has held as follows:
'It is not beyond the ken of experienced, able and astute lawyers to raise doubts and uncertainties in respect of the prosecution evidence either during trial or by the marshalling of that evidence in the manner in which the emphasis is placed thereon. But what has to be borne in mind is that the penumbra of uncertainty in the evidence before a Court is generally due to the nature and quality of that evidence. It may be that the witnesses are lying or where they are honest and truthful, they are not certrain. It is therefore, difficult to expect a scientific or mathematical exactitude while dealing with such evidence or arriving at true conclusion. Because of these difficulties corroboration is sought wherever possible and the maxim that the accused should be given the benefit of doubt becomes pivotal in the prosecution of offenders, which in other words, means that the prosecution must prove its case against an accused beyond reasonable doubt by a sufficiency of credible evidence. The benefit of doubt to which a accused is entitled to is reasonable doubt, the doubt which rational thinking men will reasonably, honestly and conscientiously entertain and not the doubt of a timid mind which fights shy- though unwillingly it may be- or is afraid of the logical consequences if that benefit was not given. Or as one great Judge said, it is not the doubt of a vacillating mind that has not the moral courage to decide but shelters itself in a vain and idle scepticism. It does not mean that the evidence must be so strong as to exclude even a remote possibility that the accused could not have committed the offence. If that were so the law would fail to protect the society as in no case such a possibility can be excluded. It will give room for fanciful conjectures or untenable doubts and will result in deflecting the course of justice if not thwarting it altogether.
In my view, the trend of evidence and the convincing array of facts in this case converge to the only conclusion that can be reasonably drawn i.e. that the accused is guilty. In my view, the doubts and uncertainties sought to raised on behalf of the accused are untenable. In my view, the prosecution has proved its case. Far from the material on record mitigating against the presumption or rendering it sterile, it enforces the presumtion. The burden of proving that there was no debt or liability as indicated by the prosecution was on the accused. In my view, even on a preponderance of probabilities, the accused has failed to discharge that burden. In my view, all the ingredients of section 138 have been fulfilled. I am of the opinion that the prosecution has proved that the accused has committed an offence under section 138 of the Negotiable Instruments Act. I accordingly hold the accused guilty of committing an offence under section 138 of the Negotiable Instruments Act. As the accused is found guilty under section 138, he will now have to be heard on the question of sentence.
114. The accused desired that on the question of sentence., his advocate be allowed to argue. That is permitted.
115. Mr. Ovalekar submitted that an offence under section 138 is non-cognisable and is appealable. He submits that it is not an offence against a society. He submits that this is clear because only the payee or the holder in due course can file such a complaint. He submits that the complaint must have a relation to a debt or liability. He submits that the debt or liability would normally be a civil claim. He submits that it has been made into an offence merely for the purpose of making cheques acceptable in the commercial world. He submits that in this case there should be no fine as the accused is a notified person. He submits that even if fine is inflicted, it may be held in abeyance to enable the accused to make an application to this Court to pay the amount of fine. He submits that even though the section provides that the fine may extend to twice the amount of the cheque, this provision must necessarily be applied only in cases where the amount of the cheque is small. He submits that it cannot be made to apply to cases like the present where the amount of the cheque is very large. He submits that in this case there are extraneous circumstances inasmuch as it is shown that the accused had given cheques worth approximately Rs. 103 crores. He submits that it is clear that all those cheques have been honoured. He submits that even these cheques would not have been dishonoured had (to use his words) ' the scam not burst'. He submits that two of the cheques were retained for five months and one cheque for three months. He submits that before this Court there is no explanation why the cheques were retained for such a long period. He submits that this shows that if the scam had not broken out, some arrangement would have been arrived at by which these cheques would have been arrived at by which these cheques would have been paid. He submits that in this case the relations between the cheques and the transactions is far and remote. He says that it is clear because the offence is of non-payment after notice. He submits that the liability or debt, i.e., liability of difference between the contract rate and the delivery rate, is only a civil liability which is not connected with the offence. He submits that in such cases a strict view, as might be taken in cases of fraud, should not be taken. He relies upon various passages from Mitra's Criminal Jurisprudence to point out that crime may originate out of economic circumstances and economic deprivation and penalty could be a contributing cause. He submits that this is a fit case where the Court should exercise its power under section 360 of the Criminal Procedure Code.
116. On the other hand Mr. Menon submits that the law itself provides that prosecution can lodged within 6 months from the date the cheques are drawn or within the period of validity of the cheques. He submits that therefore there is no substance in the contention that the cheques had been kept for a long period of time. He submits that the law itself has permitted a party to file a complaint within 6 months and it therefore cannot be an extenuating circumstance merely because the cheques had been kept for a 2 or 3 months before prosecution was launched. He submits that even in respect of economic offences, such as under the Customs Act and/or private complaints, serious view can always be taken. He submits that the Supreme Court has regularly held that in economic offences, a serious view must be taken. He submits that in this case the law itself has provided punishment for one year and fine which may extend to twice the amount of the cheque or both. He submits that this was the intention of the Legislature for the purposes of meeting the evil which existed. He submits that there can be no case, better than this, where the maximum punishment must be imposed. He submits that under section 357(1)(b), the Court when it imposes a sentence or fine may, when passing a Judgment Order the whole or part of the fine to be applied in payment to any person in compensation for any loss or injury, if the Court is of the opinion that such compensation is recoverable by such person in a Civil court. He submits that a sufficiently large fine should be imposed and the Court should direct that out of this, some amount be paid to the said Bank. He submits that it is shown that there is a loss to the said Bank.
117. I have considered both the submissions. Court has to take judicial note of fact that there has been a major fraud in this country. This Court was established because of this situation. This is a serious blow to the economy of the country. Even in this case, as we have seen the cheques are of a very large amount i.e. approximately of Rs. 78 crores. I do not agree with Mr. Ovalekar that the debt or liability is so far remote that the Court must not consider it. In my view, Mr. Menon is right when he says that there cannot be a better case where a strict sentence must be imposed. I have already held that the accused is guilty under section 138 of the Negotiable Instruments Act.
118. I, therefore, hold that the accused be punished with rigorous imprisonment for a term of one year and a fine in a sum of Rs. 1 lakh, in default to undergo further rigorous imprisonment for a term of 3 months. The sentence of fine is held in abeyance for a period of two months to enable the accused to move an application before this Court for permission to pay the same.